Abstract
Loss aversion is an important psychological characteristic that has become well supported in finance and marketing. This paper introduces consumer loss aversion into the game model with two substitutable products in a remanufacturing system. The loss-averse consumers gain utility from comparing the price and value dimensions with the superior product. Our model highlights alternative products competition, product selections, and consumption psychology in a remanufacturing environment. The results show that consumer loss aversion has important implications on key decisions in the remanufacturing system. When the manufacturer faces loss-averse consumers, there is a tendency to charge higher prices for two types of products. At the same time, the sales prices increase with the degree of loss aversion. Further analysis reveals that if the manufacturer manipulates consumers with a high probability of purchase, the feature of loss aversion usually benefits him. Our theoretical analyses are proven by numerical computation and some useful conclusions are summarized in this paper.
Highlights
Driven by the regulations around the world devoted to forcing producers to take the responsibility for their end-oflife (EOL) products, researchers are increasingly investigating the Closed-Loop Supply Chain (CLSC) in recent decades [1,2,3]
Remanufacturing is the most effective form for EOL product recovery and it is generally accepted that remanufacturing is one important means for establishing resources-saving society [10,11,12,13]. erefore, our paper addresses the concern of the operations in CLSC based on remanufacturing
Concluding Remarks e “loss aversion” theory is one of the representative theories about behavioral finance. It accounts for a variety of economic phenomena which includes the equity premium puzzle and important economic markets. is paper introduces consumer loss aversion to investigate the players’ decision-making in CLSC with remanufacturing
Summary
Driven by the regulations around the world devoted to forcing producers to take the responsibility for their end-oflife (EOL) products, researchers are increasingly investigating the Closed-Loop Supply Chain (CLSC) in recent decades [1,2,3]. In addition to the conventional Forward Supply Chain (FSC), it includes Reverse Supply Chain (RSC) in CLSC. FSC does not account for EOL products. RSC manages EOL products in the most environmentally friendly manner possible, which involves activities such as acquisition, collection, and reprocessing—reuse, recycling, or remanufacturing [4,5,6,7]. CLSC integrates both the FSC and RSC simultaneously [8, 9]. Remanufacturing is the most effective form for EOL product recovery and it is generally accepted that remanufacturing is one important means for establishing resources-saving society [10,11,12,13]. erefore, our paper addresses the concern of the operations in CLSC based on remanufacturing
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