Third-party remanufacturing mode selection for competitive closed-loop supply chain based on evolutionary game theory

Abstract Pressure from environmental responsibility and production cost reduction have been driving the rapid development of remanufacturing industry. This paper focuses on a competitive closed-loop supply chain consisting of two leading original equipment manufacturers (OEMs) and two third-party remanufacturers (TPRs). Two third-party remanufacturing modes are considered, namely, outsourcing mode and authorization mode. Considering that decision is actually a dynamic evolution process constrained by bounded rationality, evolutionary game model is selected to investigate the optimal selection of these two modes. The results show that the duopoly OEMs always prefer the outsourcing strategy. By contrast, the duopoly TPRs’ selection preferences are diverse. Specifically, when per unit new product production cost is low or consumers have a high value perception of the remanufactured product, the outsourcing strategy would be preferred by the duopoly TPRs, otherwise the authorization strategy will be selected. Moreover, the outsourcing strategy is always conducive to the profit of the whole supply chain (SC). Finally, to realize the Pareto improvement of the profit for OEM,TPR and SC, an outsourcing subsidy scheme dominated by the leading duopoly OEMs is designed.