Optimal remanufacturing decisions in supply chains considering consumers’ anticipated regret and power structures

Abstract

Abstract Empirical research indicates that consumers have uncertain valuations for remanufactured products. Purchasing decisions made under such uncertainty will lead to consumer post-purchase regrets. Anticipated regret behaviour refers to consumers taking into account the potential impact of post-purchase regret when making current purchase decisions. This study concerns the effects of anticipated regret (AR) on decision making in closed-loop supply chains (CLSCs). We examine how AR affects remanufacturing strategies for an original equipment manufacturer (OEM) and when it is profitable for an OEM to remind consumers to pay attention to AR. We further study pricing decisions between an OEM and a third-party remanufacturer (TPR) considering various power structures. Our findings show that: (i) The existence of AR will not always hurt the profits, and a higher anticipated regret sensitivity can partially ease competition between new products and remanufactured products; (ii) When the consumers’ valuation difference for remanufactured products is small, the monopolistic OEM can increase its profit by reminding consumers to consider AR; (iii) For the OEM, choosing a strong TPR to collaborate is the most advantageous when the TPR enters the market; (iv) The OEM and TPR need to pay attention to the second-mover advantages when the consumer valuation difference is low. Our study contributes to the growing body of research on behavioural CLSCs to provide insights on firms’ remanufacturing strategies.