Effects of design for the environment on firms’ production and remanufacturing strategies

Xiong Zheng, Kannan Govindan, Qianzhou Deng and Lipan Feng

International Journal of Production Economics, 2019, vol. 213, issue C, 217-228

Abstract: Firms have increasingly adopted the design for the environment (DfE) strategy because environmental regulations are gradually becoming more stringent. This can make products more recyclable and environmentally-friendly. In this study, we consider two cases, namely, a monopolistic case in which an original equipment manufacturer (OEM) and an independent remanufacturer (IR) are integrated and a competitive case in which OEM and IR are independent. A theoretical model is proposed to explore the impacts of DfE on firms' quantity decisions, as well as the impacts of competition on the DfE decision. Comparisons of the optimal decisions in the two scenarios yield some interesting results. In the monopolistic case, DfE reduces the OEMs' willingness to engage in remanufacturing, but the outcome is completely reversed in the competitive case in which DfE will incentivize IR to enter the market and cannibalize OEM's market share. Second, the optimal DfE effort level can be higher (or lower) in the competitive case than that in the monopolistic case, which relies on the relationship between the scale parameter of the investment cost of DfE and the profitability of remanufacturing. In addition, we find that under some conditions a high level of DfE may hurt the environment through the greatly increased total sales, although DfE can help reduce the environmental impact of unit product.

Keywords: Design for the environment; Remanufacturing; Competition; Cannibalization problem (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:proeco:v:213:y:2019:i:c:p:217-228

DOI: 10.1016/j.ijpe.2019.03.019

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