Optimal Recycling And Remanufacturing Strategies Under Consumers’ Name-your-own-price Behavior

At present,the development of economy and society has caused serious environmental problems.It is an important task for the government to reduce environmental pollution,improve the efficiency of resource utilization and achieve sustainable development.In practice,recycling used products for remanufacturing can both improve resource utilization and reduce production cost.Therefore,more and more attention has been paid to recycling and remanufacturing activities.One of the main problems in the remanufacturing process is to recycle used items from consumers efficiently.There are two popular pricing mechanisms.One is the posted price mechanism,and the other is name-your-own-price(NYOP)mechanism.In the recovery process,the biggest difference between the two mechanisms is that under the former mechanism,recovery price is given unilaterally by recycling agents such as OEM,remanufacturer,retailer or third party,while under the latter mechanism,the recovery price is collectively deciede by customers and recycling agents.For different customers,the recovery prices are different.In this paper,we study the optimal decisions of consumers,manufacturers and third party under these two pricing mechanisms.Specifically,this paper studies three problems as follows.First,in the recycling process,the manufacturer is faced to the problem whether the recycling business should be outsourced to third parties.Recycling costs are different if different agencies operate recycling business.We find that whether the manufacturer will outsource depends on the operating costs of the third party.When the operating cost of the third party is rather low,outsourcing will help improve the manufactuerer’s profit and the market demand,but it may have a negative impact on the environment.The results provide a guidance for the manufacturers to choose appropriate recovery channels.On the other hand,under the NYOP mechanism,we further study the situation of allowing consumers to bid twice,and obtain the optimal strategies of the consumers,the third party,and the manufacturer.Compared with the single-bid case,we find that the double-bid case can increase the profit of the recycling agents.This explains why bargaining is common in the process of recycling.Secondly,in the manufacturing process,the manufacturer with limited capacity is faced to the problem how to allocate capacity between manufacturing process and remanufacturing process.The main concern is whether the manufacturer’s profit can be improved compared with the traditional posted price mechanism.In this paper,two cases are analyzed:(a)the remanufacturing process needs less capacity than the manufacturing process;(b)the remanufacturing process needs more capacity than the manufacturing process.We find that the manufacturer’s optimal production strategy mainly depends on the dealing cost in the NYOP mechanism,the cost saving of remanufacturing(relative to the manufacturing process),the market size and the capacity.The study finds that if the manufacturing process needs more capacity,even if the manufacturing process can bring to the manufacturer cost savings,when the market size is large enough,the manufacturer may choose pure manufacturing strategy instead of remanufacturing strategy.In other words,utilizing capacity is more important than saving cost.At the same time,we find that the effect of some parameters on optimal decision is opposite in these two different situations.We further make a comparison of the NYOP mechanism and the traditional posted price mechanism,and find that when the reverse market share for the manufacturer is low,manufacturing cost is high,capacity is enough or remanufacturing process needs less capacity,the manufacturer can gain more profit under the NYOP mechanism.Finally,in the process of selling products,the manufacturer is faced to the risk of uncertain demand.He should make the optimal decisions about recovery,inventory and price to maximize his profit.In this paper,we first analyze the behavior of consumers and find that their bids increase with the dealing cost in the NYOP channel.We further establish the newsvendor model to analyze the manufacturer’s joint recovery,inventory and pricing decision by a two-step KKT method.We find that the stocking factor has an important effect on the recovery quantity and manufacturing strategy.We also analyze the effect of savalge value on the manufacturer’s strategy and profit.It shows that when the savalge value is high,the manufacturer optimally sets higher stocking factor,recycles and produces more.The effect of important parameters on system performance is also analyzed by numerical studies.It shows that the inventory level,the retail price,the quantity of manufacturing/remanufacturing products,and the profit of the manufacturer decreases when the demand uncertainty increases.In the NYOP channel,when the dealing cost increases,the quantity of remanufactured products decreases,while the quantity of new products increases.