Remanufacturing Mode Selection regarding Technology Development

Abstract

We consider a Cournot game model between an OEM (original equipment manufacturer) and an IR (independent remanufacturer). The OEM manufactures new products and decides the quality level. IR remanufactures and obtains OEM’s technology through technology licensing or joint R&D. To prevent the cannibalization of new products by remanufactured products, the OEM may be reluctant to disclose latest technology to the IR. When the IR chooses the technology licensing mechanism, it will be in a rather disadvantaged position in the competition. In contrast, joint R&D can avoid this dilemma. The two mechanisms are comparatively analyzed under static equilibrium and complex dynamics from three aspects: (1) the output of new and remanufactured products, (2) the profits of the OEM and the IR, and (3) TEI (total environmental impact) under technology licensing mechanism and joint R&D mechanism, respectively. Based on the theoretical and numerical analysis, we derive that the joint R&D mechanism can achieve a Pareto improvement over the royalty mechanism under certain conditions. The stability, bifurcation, chaos, and largest Lyapunov exponent are analyzed in the dynamic model. Numerical examples show that chaos may cause the OEM and the IR to lose profits or even be in deficit. But from the perspective of TEI, chaos can be beneficial. Interestingly, some conclusions in the static setting are reversed in the chaotic state. We propose a feedback adjustment method to eliminate chaos.