Game Theoretical Analysis of Remanufacturing Quality and Capacity Choice
Remanufacturing capacities are constrained by the collected amount of end-of-life (EOL) products resulting in the make-from-stock model for remanufacturing industries. Remanufacturers may select quality choices in a strategic manner to improve their remanufacturing capacities. Thus, we examine a Cournot duopoly where an original equipment manufacturer (OEM) sells new products and an independent remanufacturer (IR) remanufactures EOL products and determine the production quantities of low- and high-quality remanufactured products. The IR can select pure low-quality, pure high-quality, or mixed-quality policies. We formulate the dynamics between the OEM and IR in a two-period game, solve for the firms' equilibrium quantities through dynamic programming, and derive the conditions of the production-quality policies.
Keywords - Quality; Remanufacturing; Cournot Game; Production-Quality Policy; Make From Stock