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Analysis for recycling and remanufacturing strategies in a supply chain considering consumers’ heterogeneous WTP

Long, Xiaofeng, Ge, Jiali, Shu, Tong, Liu, Yu
Resources, conservation, and recycling 2019 v.148 pp. 80-90
consumer surplus, issues and policy, models, profits and margins, recycling, supply chain, willingness to pay
Empirical and theoretical research has shown that consumers’ willingness to pay (WTP) has a significant impact on manufacturers’ decisions. Based on these findings, we establish models for multiple remanufacturing modes considering WTP heterogeneity or different remanufactured products, in one-period and two-period closed-loop supply chain (CLSC) scenarios, to identify the optimal recycling and remanufacturing decisions of manufacturers. We find that manufacturers should participate in remanufacturing in one-period or two-period settings to earn more profits. In the one-period scenario, hybrid remanufacturing is better for the manufacturer than single remanufacturing, and the manufacturer chooses its remanufacturing partner based on the lower remanufacturing cost. In the two-period scenario, when the WTP ratio is above a certain threshold, the manufacturer chooses the third party as its joint recycling partner to obtain higher consumer surplus, a higher recycling rate, and higher profits. If the WTP ratio is high enough, hybrid remanufacturing is better for the manufacturer. The manufacturer does not authorize the distributor to engage in remanufacturing, for this choice yields the lowest profits for the manufacturer independent of WTP ratio. These results have policy implications from the perspective of CLSC cooperative recycling and remanufacturing.