OEM's optimal remanufacturing mode considering patent license under different commission contracts with platform

Lifeng Mu, Yan Wang and Vijayan Sugumaran ()
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Lifeng Mu: Shanghai University
Yan Wang: Shanghai University
Vijayan Sugumaran: Oakland University

Electronic Commerce Research, 2025, vol. 25, issue 3, No 14, 1753-1792

Abstract: Abstract While e-commerce platforms provide an online marketplace for manufacturer's new products and remanufactured products, they also participate in remanufacturing. Manufacturers can take advantage of patent licensing to make a profit from new entrants or still maintain remanufacturing internally. To better understand such a novel business competition and partnership, we develop a two-period game-theoretic model and analyze a market consisting of one OEM, one platform, and heterogeneous consumers in product valuation. Given that a platform may provide two forms of commission (proportional fee contract and per-unit fee contract), two remanufacturing modes of OEM (in-house remanufacturing and authorized remanufacturing) are investigated and it generates four business scenarios. Interestingly, different from previous research, our results reveal that remanufacturing mode selection not only depends on remanufacturing cost but is also affected by market parameters (that is the commission fee). In addition, we found that OEM's royalty fee and remanufacturing strategies show different characteristics to the change of commission under proportional fee contract because of the free-riding behavior of the platform. Finally, we compare the profits of OEM and platform under different commission contracts and gain insights that the proportional fee contract is always favorable for OEM, and commission contract choice of the platform depends on remanufacturing cost.

Keywords: In-house remanufacturing; Authorized remanufacturing; Licensing strategy; Commission contract; Cournot competition model (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s10660-023-09728-y

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