The dynamics of competition in remanufacturing: A stability analysis

In this paper, we study competition in remanufacturing. It involves an original manufacturer who makes new products and a remanufacturer who uses returned cores to produce differentiated products. The two manufacturers competitively determine their outputs based on boundedly rational expectation in dynamic competition process, which has been largely overlooked in prior literatures. The study shows that consumer's willingness-to-pay (WTP) has distinct effects on the manufacturers' performance and the stability of Nash equilibrium. A higher level of WTP may enhance or weaken the stability of Nash equilibrium, while it always jeopardizes the original manufacturer and benefits the remanufacturer. We further observe that market competition can converge to Nash equilibrium rapidly with a high speed of output adjustment, but may continue to deviate from it via two ways when the speed goes beyond a threshold. The results suggest that the original manufacturer should choose an appropriate adjustment speed to gain an advantage, and the remanufacturer should improve consumer's WTP to profit more.