Abstract
We consider a Cournot game model between an OEM (original equipment manufacturer) and an IR (independent remanufacturer). The OEM manufactures new products and decides the quality level. IR remanufactures and obtains OEM’s technology through technology licensing or joint R&D. To prevent the cannibalization of new products by remanufactured products, the OEM may be reluctant to disclose latest technology to the IR. When the IR chooses the technology licensing mechanism, it will be in a rather disadvantaged position in the competition. In contrast, joint R&D can avoid this dilemma. The two mechanisms are comparatively analyzed under static equilibrium and complex dynamics from three aspects: (1) the output of new and remanufactured products, (2) the profits of the OEM and the IR, and (3) TEI (total environmental impact) under technology licensing mechanism and joint R&D mechanism, respectively. Based on the theoretical and numerical analysis, we derive that the joint R&D mechanism can achieve a Pareto improvement over the royalty mechanism under certain conditions. The stability, bifurcation, chaos, and largest Lyapunov exponent are analyzed in the dynamic model. Numerical examples show that chaos may cause the OEM and the IR to lose profits or even be in deficit. But from the perspective of TEI, chaos can be beneficial. Interestingly, some conclusions in the static setting are reversed in the chaotic state. We propose a feedback adjustment method to eliminate chaos.
Highlights
Introduction e United States Environmental ProtectionAgency (EPA) repeatedly promotes waste reduction and resource conservation through reusing, recycling, and remanufacturing end-of-life products
We use the ex post strategy to represent licensing royalty mechanism, which is denoted by the superscript R; the joint research and development (R&D) mechanism is still represented by the superscript J
(2) If φβ(θn − 1)2 ≤ M(r), joint R&D is the better mechanism for IR; otherwise, royalty is the better mechanism
Summary
We consider a duopoly Cournot game model between an OEM and an IR. e OEM determines the product quality at level θn (≥1) and sells new products. e IR collects used products and remanufactures them. E OEM determines the product quality at level θn (≥1) and sells new products. E IR can get patented technology license from the OEM by paying royalty or investing in R&D. Consumers consider quality of remanufactured products to be inferior to new products and use θr as a quality discount factor. When licensing to the IR by royalty, the OEM can choose to disclose the latest technology ex ante or ex post. E utility of consumers buying new and remanufactured products is un θnu − pn and ur θrθnu − pr, respectively [2, 38]. Remanufactured products consume less virgin resources by reusing some parts. We use α to describe the level of resource savings and cost advantages of the remanufactured products.
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