Researchers and managers broadly agree that the entry of third-party remanufacturers (TPRs) hurts original equipment manufacturers (OEMs) because of the cannibalization problem. Thus, OEMs should always try to deter the entry of TPRs. In this paper, we present a contrasting view: Competing OEMs without remanufacturing capacities sometimes benefit from the entry of TPRs. The key feature of our model is that there exists a group of newness-conscious consumers in the market who do not buy the remanufactured product regardless of the price, whereas a group of functionality-oriented consumers may buy a remanufactured one at a low price. In a steady-state-period setting, we investigate how the number of TPRs affects the OEMs’ profits. We find that, from the perspective of two competing OEMs: (1) The entry of one or many TPRs may lead to a higher profit; (2) The entry of many TPRs may be better than the entry of one TPR; (3) The impact of the entry of one or many TPRs may be reversed as functionality-oriented consumers’ willingness-to-pay for the remanufactured product increases.
['Xiaole Wu', 'Yu Zhou']
Does the Entry of Third-Party Remanufacturers Always Hurt Original Equipment Manufacturers?