Optimal Recycling Strategies with the Name-Your-Own-Price Mechanism

Abstract

Recycling and remanufacturing have emerged as a key instrument in pursuit of environment-friendly sustainability in the society. Using game-theoretic approaches, this article investigates the optimal pricing and remanufacturing strategies of an original equipment manufacturer (OEM) in recycling used products by either itself or a third-party (TP) under the name-your-own-price (NYOP) mechanism. Our analysis demonstrates that either the OEM recycling or the TP recycling can outperform the other in terms of firms’ profits, consumer utility, and environmental impact. However, there exists a conflicting zone, in which the TP recycling is more profitable for the firms, but the OEM recycling leads to more consumer utility and less environmental impact. Comparing the NYOP mechanism to the list-price mechanism reveals that the OEM conditionally prefers the NYOP mechanism to the list-price mechanism; however, the OEM and the TP may encounter another preference confliction, in which the OEM prefers the NYOP whereas the TP prefers the list-price. The firms’ preference for NYOP dwindles as the used-product seller’s belief of the NYOP reserve price grows. Enabling haggling in NYOP does not always enhance the firms’ profits, consumer utility, and environment-friendly level.