Production decisions in remanufacturing under the cap-and-trade considering consumer education and government subsidies

Abstract

Remanufacturing, which is encouraged by the government but lacks consumer acceptance, can help manufacturers relieve carbon emission pressure under the carbon cap and trade mechanism (CCT-mechanism). In our research, there is an original equipment manufacturer (OEM) and an independent remanufacturer (IR) in the market. A game-theoretic model is constructed to discuss the optimal production decisions of the OEM and IR under the CCT-mechanism. Furthermore, the level of consumer education may affect the acceptance of remanufactured products and government subsidy, so an extended model is proposed. Then, the effects of the CCT-mechanism, government subsidies and consumer education on production decisions are analysed. The results show that the CCT-mechanism can prompt the OEM to enter remanufacturing and that the impact of the increasing rate is similar to the carbon price, but the latter is more effective. Government subsidies to the OEM are more efficient than those to the IR. Subsidization plays an important role in the early stage of remanufacturing, but it is not always necessary. IRs benefit from consumer education; however, OEMs cannot always benefit from consumer education.