Competition of consumables’ original brand manufacturers and remanufacturers considering the entry of compatible manufacturers

Abstract

Original brand consumables and remanufactured consumables are provided in the after-sales market, and in recent years the entry of compatible consumables provides a new option for consumers. Compared with original brand consumables, remanufactured and compatible consumables enjoy a cost advantage, but they suffer from different consumer trust discounts in the market. In order to capture the scenarios that before and after compatible products enter, we develop two independent static game models and explore equilibrium market structures for three types of consumables. Surprisingly, we find that (1) the more obscure consumer trust in remanufactured and compatible products, the more favorable to the coexistence of the three products, however, the appropriate distinction between remanufactured and compatible products is beneficial to a remanufacturer; (2) reduction of the failure rate by the remanufacturer will give free-riding opportunities to compatible products that also have non-original brand characteristics; and (3) the entry of compatible products cannot always improve consumer surplus and social welfare. These findings provide management suggestions for three types of manufacturing enterprises to sort out their competitive relationships, and also give policy implications for the government to promote the remanufacturing industry.