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

92 Pages Posted: 30 Dec 2020

See all articles by Gangshu (George) Cai

Gangshu (George) Cai

Santa Clara University

Jianbin Li

Huazhong University of Science and Technology

Qifei Wang

Huazhong University of Science and Technology

Stuart X. Zhu

affiliation not provided to SSRN

Date Written: October 19, 2020

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.

Keywords: name-your-own-price, list-price, remanufacturing, recycling, game theory

JEL Classification: C7, P4

Suggested Citation

Cai, Gangshu (George) and Li, Jianbin and Wang, Qifei and Zhu, Stuart X., Optimal Recycling Strategies with the Name-Your-Own-Price Mechanism (October 19, 2020). Available at SSRN: https://ssrn.com/abstract=3714610 or http://dx.doi.org/10.2139/ssrn.3714610

Gangshu (George) Cai (Contact Author)

Santa Clara University ( email )

500 El Camino Real
Santa Clara, CA CA 95053
United States
4085542785 (Phone)

Jianbin Li

Huazhong University of Science and Technology ( email )

Wuhan, Hubei
China

Qifei Wang

Huazhong University of Science and Technology ( email )

1037# Luoyu Road, Hongshan Dist.
Wuhan, Hubei 430074
China

Stuart X. Zhu

affiliation not provided to SSRN

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