Track: Poster Competitions

Abstract

This study examines used product disposal and production strategies in a closed-loop supply chain under two environmental regulations: emissions taxes and waste management taxes. The closed-loop supply chain consists of an Original Equipment Manufacturer (OEM) and a Third-Party Remanufacturer (TPR). The OEM produces and sells new products and is responsible for the end-of-life phase of these products. Due to his inability to properly dispose of used products, the OEM either pays waste management taxes or outsources used product disposal to the TPR. The TPR disposes of used products by remanufacturing or recovering materials. Additionally, she may decide to produce her own-brand new products using recovered materials. The TPR sells both remanufactured and new products in the same market as the OEM, thus resulting in potential market cannibalization between two firms. Market cannibalization likely prevents the OEM from outsourcing disposal to the TPR and reduces the TPR’s willingness to remanufacture used products as well as producing new products. At last, two firms need to pay emissions taxes for pollutants released during production, remanufacturing, and materials recovery. To examine the OEM’s disposal outsourcing strategies and the TPR’s disposal and new product production strategies, we consider three scenarios: no disposal outsourcing, disposal outsourcing without TPR’s new product production, and disposal outsourcing with TPR’s new product production. Our results reveal the TPR’s disposal and new product production strategies as well as the OEM’s outsourcing strategies coupled with the corresponding conditions. Additionally, per the results, a low emission tax or an extreme high (or low) collection cost discourages the TPR from remanufacturing, whilst a high waste management tax incentivizes the OEM to outsource disposal. Interestingly, despite the competition between two firms’ new products, the introduction of the TPR’s new product can induce the OEM to outsource disposal to the TPR.