Pricing decisions and remanufacturing strategies considering consumer recycling behavior

This paper incorporates consumers’ recycling behavior in remanufacturing decisions and strategies. We first empirically demonstrate that both firms’ monetary incentives and consumers’ environmental awareness positively influence consumers’ recycling behavior, then construct theoretical models to incorporate such consumers’ recycling behavior in two common remanufacturing strategies: remanufacturing by the manufacturer itself (self-remanufacturing) and by the authorized remanufacturer (authorization remanufacturing). We find that: first, when consumers are of high environmental awareness, the recycling amount driven by environmental awareness is enough to support the optimal production plan. Thus, there is no necessity for firms to implement monetary incentives. When consumers’ environmental awareness becomes lower, firms make a tradeoff between collection cost and profit improvement by increasing collection and finally decide to implement monetary incentives only when consumers’environmental awareness is low. Second, except for the new products’ price under the self-remanufacturing strategy, firms’ decisions under each strategy, such as the new products’ price, remanufactured products’ price, and the license fee, will change with consumers’ recycling behavior when consumers’ environmental awareness is not very high. As a result, the manufacturer’s profit increases with consumers’ environmental awareness no matter which remanufacturing strategy it adopts. However, the remanufacturer’s profit (under the authorization remanufacturing strategy) may decrease with consumers’ environmental awareness. Third, consumers’ recycling behavior is the determining factor for the manufacturer’s remanufacturing strategy selection. Our results reveal that ignoring consumers’ recycling behavior will lead to tremendous decision and strategy deviation in remanufacturing.