Outsourcing or Authorizing? Optimal Options for Third-Party Remanufacturing Modes with Green Consumerism

Abstract

In recent decades, more and more consumers are becoming concerned about the environment and increasingly tend to buy remanufactured products. However, despite the emergence of green consumerism, many original equipment manufacturers (OEMs) are unlikely to engage in remanufacturing themselves and instead prefer to contract it to third-party remanufacturers (TPRs). Although the literature has recently highlighted the difference between outsourcing and authorizing remanufacturing, it does not explore how green consumerism impacts the choice between these two remanufacturing modes. To fill this gap, in this study, we develop two theoretical models according to which the OEM can outsource or authorize its remanufacturing operations to a TPR to satisfy green consumers who prefer remanufactured products. By comparing optimal outcomes, such as quantities, profit, and environmental factors, our analysis shows that a substantial proportion of environmentally conscious consumers prefer the strategy of remanufacturing outsourcing, which provides a win–win–win strategy for the OEM, the TPR, and the environment; otherwise, the OEM chooses to authorize remanufacturing, which negatively affects the TPR and the environment. As such, we suggest that governments try to increase the proportion of the population that favors green consumerism or implement measures that encourage OEMs to adopt remanufacturing outsourcing.