Channel selection for automotive parts remanufacturer under government replacement-subsidy

Abstract

This paper considered government replacement-subsidy policy to examine the channel selection of the automotive parts remanufacturer and we constructed two channel models in which the automotive parts remanufacturer may choose the supplier mode or competitor mode. Due to the relatively low acceptance of remanufactured automotive parts in developing countries such as China, we model the two scenarios with government offering replacement-subsidy to the remanufacturer to incentivise automotive parts remanufacturing activities. Then, we discuss the impacts of the replacement-subsidy policy on the strategy of channel selection by applying a game theory method. We find that the scope of the automotive parts remanufacturer's net cost is quite vital, which is decided by the government replacement price, subsidy and costs of the remanufacturer. The subsidy and replacement price to customers have an affirmative influence on the protection of the environment within a specific range. [Received 4 September 2017; Revised 22 May 2018; Accepted 22 June 2018]