Research on the decision-making of third-party remanufacturing closed-loop supply chain with remanufacturing process innovation and risk aversion

This paper focuses on the risk aversion and remanufacturing process innovation in third-party remanufacturing closed-loop supply chain. We consider a supply chain consisting of a manufacturer, a risk-averse retailer, and a third party.The manufacturer sells new products through the retailer. The third party produces remanufactured products and implements process innovation for remanufacturing (PIR). Two Stackelberg game models with the consideration of third-party remanufacturing process innovation are studied: authorized remanufacturing (modelA) and outsourcing remanufacturing (model O). By analyzing equilibrium solutions of the different remanufacturing patterns, it is shown that risk aversion promotes the production of remanufactured products, and the expected profit of third party but is detrimental for the manufacturer. The retailer's expected profit first increases and then decreases as risk aversion degree increases. Model A benefits the expected profits of the third party and retailer, and model O benefits the manufacturer. In addition, the expected environmental impact increases first and then decreases with the increase of PIR cost coefficient and is positively correlated with risk aversion degree. Model A is more environmentally friendly when the impact factor of PIR on environmental impact is below a certain threshold which is negatively correlated with the risk-aversion coefficient and positively correlated with PIR investment cost coefficient.