Considering Recycling Investment Strategies Under Internal and External Competition in the Remanufacturing Supply Chain

A vertical supply chain consisting of an original equipment manufacturer (OEM) and a downstream retailer, faces internal competition between new and remanufactured products, along with external competition from a third party remanufacturer (3PR). These competitive forces not only affect the sales of different product types but also directly impact the recycling of used products, which in turn affects the production and sales of remanufactured products. Against this backdrop, this article investigates the impact of separate and cooperative recycling investments by the OEM and retailer on profits and the environment, by considering different Vertical structure (i.e., OEM as Stackelberg leader, retailer as Stackelberg leader, and Vertical Nash). Our findings indicate that cooperative investment is optimal when either the OEM or retailer is the Stackelberg leader, but neither party is willing to invest in recycling when they are in Vertical Nash. When the OEM is the Stackelberg leader, the environmental impact of the cooperative investment model always falls between the other two models' environmental impacts. Comparatively, when the retailer is the Stackelberg leader or in Vertical Nash, the environmental impact is the same across investment models. Further experiments reveal that the OEM, acting as the Stackelberg leader, and implementing the cooperative investment strategy, yields better economic and environmental benefits, but the sales prices of both new and remanufactured products are higher in this case. Our study provides some important managerial implications that can be utilized as strategic guidance for the remanufacturing industry