A Study on Recycle Schedules for Trade-In Rebates With Consideration of Product Life Cycle

Firms can appropriately recycle used products to not only save material costs, but also bring back customers to make repurchases. However, customers may return their used products at any time and in any condition, and firms may thus be unable to fully utilize the returned items in their remanufacturing activities. This study considers a firm that actively recycles its current product, and then sells both new and remanufactured items to the market to compete against a mainstream product produced by a large-scale rival firm, and proposes a two-stage model in which the current product is sold in the first stage and is then recycled in the second stage. The optimal pricing strategy for the current product under competition is determined for the sales stage. With regard to the recycling stage, consumer utility and product remaining value are considered to estimate the probability that customers would return their used products, which can then be remanufactured within the product life cycle. Two different recycling approaches for trade-in rebates are considered to collect used products, fixed timing recycling and continuous period recycling, to investigate their effects on the remanufacturing profitability. Under the assumptions of duopoly market and the two recycling approaches for trade-in rebates, the results indicate that when collecting used products at a fixed time point, the conditions of used products should be a significant concern, and when recycling in a continuous period, appropriately setting a starting timing for collecting used products on the market would be beneficial to the firm.