Cooperation or Competition? Channel Choice for a Remanufacturing Fashion Supply Chain with Government Subsidy

Kangzhou Wang, Yingxue Zhao, Yonghong Cheng and Tsan-Ming Choi
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Kangzhou Wang: School of Management, Lanzhou University, Lanzhou 730000, China
Yingxue Zhao: School of International Trade and Economics, University of International Business and Economics, Beijing 100029, China
Yonghong Cheng: School of Economics and Business Administration, Chongqing University, Chongqing 400044, China
Tsan-Ming Choi: Institute of Textiles and Clothing, The Hong Kong Polytechnic University, Hung Hom, Kowloon, Hong Kong, China

Sustainability, 2014, vol. 6, issue 10, 1-19

Abstract: In this paper, we address the problem of choosing an appropriate channel for the marketing channel structure of remanufactured fashion products. To be specific, we consider a remanufacturer who has two options for selling the products: (1) provide the remanufactured products to a manufacturer, then the manufacturer sells both new products and the remanufactured products to customers, and (2) sell the remanufactured products directly to customers. Because of the relatively low acceptance of remanufactured products and environment consciousness of customers in developing countries like China, we model the two scenarios as decentralized remanufacturing supply chains, with the manufacturer being the Stackelberg leader and the government offering subsidy to the remanufacturer to incentivize remanufacturing activities. We find that the subsidy can incentivize remanufacturing activity regardless of the remanufacturer’s channel choice. A “too high” or “too low” subsidy makes the remanufacturer compete with the manufacturer, and an intermediate subsidy results in cooperation between the two members of the remanufacturing supply chain. Meanwhile, if the customers’ acceptance for remanufactured products is higher, the remanufacturer will be more likely to compete with the manufacturer. However, the remanufacturer’s optimal channel choice may be inefficient in the sense of social welfare and environmental protection.

Keywords: remanufacturing supply chain; fashion business operations; closed-loop supply chain; government subsidy; channel choice; cooperation; competition (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (30)

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