Does Product Eco-design Promote Remanufacturing: Application of a Stylized Game-theoretic Model

Abstract

As an effective approach to reduce resource waste and production costs, remanufacturing has elicited extensive attention from the industry and academia. Many electronic original equipment manufacturers (OEMs) have increasingly begun to incorporate product eco-design (PED) into their remanufacturing processes since take-back regulations that hold OEMs responsible for handling their own end-of-life products have gradually become more stringent. The investment costs for the PED implementation vary across different PED effort levels (i.e., high, medium, and low) chosen by the OEM, and different PED effort levels may yield different remanufacturing strategies. In this paper, we develop a stylized game-theoretic model to investigate the impact of PED effort levels on the OEM’s equilibrium decisions (which include production quantities of new and remanufactured products) and supply chain performance in the context of take-back legislation. Our results demonstrate that high PED effort levels do not imply more remanufacturing and that the OEM’s choice of remanufacturing strategies depends on the trade-off between cost savings from remanufacturing and deterministic risks. Interestingly, we find that new products should have a certain level of profitability to ensure the validity of take-back legislation. Due to the substitution and complementary effects between new and remanufactured products, the optimal decisions exhibit different characteristics in remanufacturing strategies. Through a numerical study, we observe that the economic performance decreases with increases in the PED effort level under take-back legislation, but the change in the total environmental impact depends on the PED effort level and the production cost of new products.