Evolving remanufacturing strategies in China: an evolutionary game theory perspective

Abstract

Rapid pace of natural resource depletion and environment deterioration is a cause of concern worldwide. Remanufacturing offers a promising option for reduction in the waste and the resources consumption. As a rapidly developing economy, China initiated remanufacturing efforts in the 1990s. While focusing on the evolution of remanufacturing in China, using a game theoretic setup, we analyze manufacturer and retailer's decisions to enter remanufacturing industry. Entry decisions are determined based on evolutionary stable strategies (ESS) for both parties in different phases of remanufacturing in China. The model uses replicator dynamic system to establish ESS. We find that a different ESS is suitable in different phase of evolution. As our model reveals, over time, additional new players have entered the industry. Finally, we conclude that remanufacturing industry in China is well prepared to increase its scale and help alleviate the concerns of waste and environment deterioration. This could be primarily attributed to the government policies, subsidies, and incentives that have played an important role in kick-starting the industry. To verify theoretical results, a case study was conducted involving a prominent manufacturer and retailer. Based on the mathematical findings and case analysis, we make several suggestions for government policymakers, practitioners, and enterprises to enable additional companies enter the market and increase the scale of remanufacturing.