Competition and cooperation in a remanufacturing system with take-back requirement

Abstract

This paper deals with remanufacturing in a reverse logistics chain with one original equipment manufacturer (OEM) and one remanufacturer. Toner cartridge industry is a typical example of remanufacturing. The OEM sells new products under the "take-back requirement" and takes the responsibility by paying corresponding penalties if the take-back quota for the end-of-use products is breached. Once the lifetime of products ends, they are bought back by the remanufacturer and released to the market after remanufacturing process. In this study, the optimal pricing policies of OEM and remanufacturer are studied under two cases, competition and cooperation, through the development of mathematical models with the objective of profit maximization. The first case is solved with the repeated game model and the second one with a search procedure. Also, sensitivity analysis is conducted to analyze the interactions between the two parties.