Incentive Policy Options for Product Remanufacturing: Subsidizing Donations or Resales?

Xiaodong Zhu, Zhe Wang, Yue Wang and Bangyi Li
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Xiaodong Zhu: School of Management Engineering, Nanjing University of Information Science Technology, Nanjing 210044, China
Zhe Wang: College of Economics and Management, Nanjing University of Aeronautics and Astronautics, Nanjing 210016, China
Yue Wang: College of Economics and Management, Nanjing University of Aeronautics and Astronautics, Nanjing 210016, China
Bangyi Li: College of Economics and Management, Nanjing University of Aeronautics and Astronautics, Nanjing 210016, China

IJERPH, 2017, vol. 14, issue 12, 1-16

Abstract: Remanufactured products offer better environmental benefits, and governments encourage manufacturers to remanufacture through various subsidy policies. This practice has shown that, in addition to product sales, remanufactured product can also achieve its value through social donation. Based on the remanufactured product value realization approaches, governments provide two kinds of incentive policies, which are remanufactured product sales subsidies and remanufactured product donation subsidies. This paper constructs a two-stage Stackelberg game model including a government and a manufacturer under two different policies, which can be solved by backward induction. By comparing the optimal decision of the two policies, our results show that, compared with the remanufacturing sales subsidy, donation subsidy weakens the cannibalization of remanufactured products for new products and increases the quantity of new products. It reduces the sales quantity of remanufactured products, but increases their total quantity. Under certain conditions of low subsidy, the manufacturer adopting sales subsidy provides better economic and environmental benefits. Under certain conditions of high subsidy, the manufacturer adopting donation subsidy offers better economic and environmental benefits. When untreated product environmental impact is large enough, donation subsidy policy has a better social welfare. Otherwise, the choice of social welfare of these two different policies depends on the social impact of remanufactured product donated.

Keywords: remanufacturing; government subsidy; donation; sales (search for similar items in EconPapers)
JEL-codes: I I1 I3 Q Q5 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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