Abstract
In this paper, we analyze a two-period model of a manufacturer who makes and sells a new product and a remanufacturer who competes with the manufacturer in the second period. We examine the effects of government subsidies as a means to promote remanufacturing activity. In particular, we consider a subsidy proportional to remanufacturing volume that is paid solely to the remanufacturer, solely to the manufacturer, or shared among the firms. We find that the introduction of subsidies increases remanufacturing activity, and that the manufacturer's profits generally decrease while the remanufacturer's profits increase when 100% of the subsidy goes to the remanufacturer. We also find that a policy-maker should consider a subsidy scheme with some positive fraction of the subsidy paid to the manufacturer. Remanufacturing activity is generally higher and profits of both firms increase. In addition, subsidy sharing creates incentives for the manufacturer to design a product that is more suitable for remanufacturing, and to be more open to efforts to increase the return rate of end-of-life products.
| Original language | English (US) |
|---|---|
| Pages (from-to) | 287-298 |
| Number of pages | 12 |
| Journal | International Journal of Production Economics |
| Volume | 111 |
| Issue number | 2 |
| DOIs | |
| State | Published - Feb 2008 |
| Externally published | Yes |
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Keywords
- Closed-loop supply chains
- Competitive strategy
- Pricing
- Remanufacturing
- Reverse logistics
ASJC Scopus subject areas
- Economics and Econometrics
- Industrial and Manufacturing Engineering
Cite this
Competition in remanufacturing and the effects of government subsidies. / Mitra, Supriya; Webster, Scott.
In: International Journal of Production Economics, Vol. 111, No. 2, 02.2008, p. 287-298.Research output: Contribution to journal › Article
}
TY - JOUR
T1 - Competition in remanufacturing and the effects of government subsidies
AU - Mitra, Supriya
AU - Webster, Scott
PY - 2008/2
Y1 - 2008/2
N2 - In this paper, we analyze a two-period model of a manufacturer who makes and sells a new product and a remanufacturer who competes with the manufacturer in the second period. We examine the effects of government subsidies as a means to promote remanufacturing activity. In particular, we consider a subsidy proportional to remanufacturing volume that is paid solely to the remanufacturer, solely to the manufacturer, or shared among the firms. We find that the introduction of subsidies increases remanufacturing activity, and that the manufacturer's profits generally decrease while the remanufacturer's profits increase when 100% of the subsidy goes to the remanufacturer. We also find that a policy-maker should consider a subsidy scheme with some positive fraction of the subsidy paid to the manufacturer. Remanufacturing activity is generally higher and profits of both firms increase. In addition, subsidy sharing creates incentives for the manufacturer to design a product that is more suitable for remanufacturing, and to be more open to efforts to increase the return rate of end-of-life products.
AB - In this paper, we analyze a two-period model of a manufacturer who makes and sells a new product and a remanufacturer who competes with the manufacturer in the second period. We examine the effects of government subsidies as a means to promote remanufacturing activity. In particular, we consider a subsidy proportional to remanufacturing volume that is paid solely to the remanufacturer, solely to the manufacturer, or shared among the firms. We find that the introduction of subsidies increases remanufacturing activity, and that the manufacturer's profits generally decrease while the remanufacturer's profits increase when 100% of the subsidy goes to the remanufacturer. We also find that a policy-maker should consider a subsidy scheme with some positive fraction of the subsidy paid to the manufacturer. Remanufacturing activity is generally higher and profits of both firms increase. In addition, subsidy sharing creates incentives for the manufacturer to design a product that is more suitable for remanufacturing, and to be more open to efforts to increase the return rate of end-of-life products.
KW - Closed-loop supply chains
KW - Competitive strategy
KW - Pricing
KW - Remanufacturing
KW - Reverse logistics
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U2 - 10.1016/j.ijpe.2007.02.042
DO - 10.1016/j.ijpe.2007.02.042
M3 - Article
VL - 111
SP - 287
EP - 298
JO - International Journal of Production Economics
JF - International Journal of Production Economics
SN - 0925-5273
IS - 2
ER -