Managing New and Remanufactured Products

TLDR

The study examines a firm that produces new products in the first period and later offers remanufactured versions using returned cores. The paper introduces monopoly settings across two‑ and multi‑period scenarios to identify remanufacturing thresholds. The authors analyze both monopoly and duopoly environments, modeling core interception by independent operators and deriving Nash‑equilibrium production quantities while exploring parameter effects. When remanufacturing is highly profitable, the OEM may lower first‑period prices to boost core availability, and increased competition drives the OEM to fully utilize cores and sell remanufactured products at lower prices.

Abstract

We study a firm that makes new products in the first period and uses returned cores to offer remanufactured products, along with new products, in future periods. We introduce the monopoly environment in two-period and multiperiod scenarios to identify thresholds in remanufacturing operations. Next, we focus our attention on the duopoly environment where an independent operator (IO) may intercept cores of products made by the original equipment manufacturer (OEM) to sell remanufactured products in future periods. We characterize the production quantities associated with self-selection and explore the effect of various parameters in the Nash equilibrium. Among other results, we find that if remanufacturing is very profitable, the original-equipment manufacturer may forgo some of the first-period margin by lowering the price and selling additional units to increase the number of cores available for remanufacturing in future periods. Further, as the threat of competition increases, the OEM is more likely to completely utilize all available cores, offering the remanufactured products at a lower price.