Economic, Environmental, and Social Impact of Remanufacturing in a Competitive Setting

Abstract

This paper studies the environmental and social trade-offs of remanufacturing for product+service firms under competition. We use an analytical model and a behavioral study that together incorporate demand cannibalization from multiple customer segments across the competing firms' product lines. We measure firms' profits, consumer surpluses, environmental impacts, and environmental costs along the products lifecycles in the resultant equilibria with and without remanufacturing. We show that competition intensifies the tension between increased profit and worsened environmental impact from market expansions caused by remanufacturing identified by prior research in the case of monopoly. However, bringing in the social dimension leads to an overall positive assessment: remanufacturing creates additional consumer surplus, which compensates for the cost of the environmental impact. In other words, we found strong support that remanufacturing is beneficial for the society.

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