How strategic consumers shape manufacturer refurbishment strategies under collection target

Xintong Chen; Qiangfei Chai; Zelin Wang; Xintong Chen; Qiangfei Chai; Zelin Wang

doi:10.3934/jimo.2026041

Journal of Industrial and Management Optimization

2026, Volume 22, Issue 2: 1112-1139. doi: 10.3934/jimo.2026041

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Research article

How strategic consumers shape manufacturer refurbishment strategies under collection target

1.
School of Management, Nanjing University of Posts and Telecommunications, Nanjing 210003, China
2.
School of Management Science and Engineering, China Jiliang University, Hangzhou 310018, China

Received: 03 July 2025 Revised: 29 December 2025 Accepted: 14 January 2026 Published: 28 January 2026
91-10, 91B42

This paper examines a critical challenge in the circular economy: How manufacturers can formulate profitable refurbishment strategies under mandatory collection targets when facing strategic consumers. We develop a two-period game-theoretic model in which the manufacturer’s collection effort is constrained by an exogenously mandated collection target. Our analysis examines the viability of refurbishment as a function of this target, the quality of the refurbished products, and the consumers’ willingness to wait. We reveal the following key insights: (1) Stringent collection targets can paradoxically suppress refurbishment activities by forcing manufacturers to collect beyond economically viable limits; (2) refurbishment becomes profitable only when the quality of refurbished products is sufficiently high to offset cannibalization effects on new product sales; (3) the impact of strategic consumers’ behavior on social welfare varies significantly across different compliance scenarios, with increased consumer patience sometimes reducing overall welfare; and (4) in competitive settings, a manufacturer’s all-collection strategy can serve as an effective barrier to entry against independent refurbishers. Our findings offer valuable insights for policymakers designing product take-back regulations and for manufacturers developing circular economy strategies in markets with strategic consumers.
- strategic consumers,
- collection target,
- refurbishment,
- social welfare,
- game theory
Citation: Xintong Chen, Qiangfei Chai, Zelin Wang. How strategic consumers shape manufacturer refurbishment strategies under collection target[J]. Journal of Industrial and Management Optimization, 2026, 22(2): 1112-1139. doi: 10.3934/jimo.2026041

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Abstract

This paper examines a critical challenge in the circular economy: How manufacturers can formulate profitable refurbishment strategies under mandatory collection targets when facing strategic consumers. We develop a two-period game-theoretic model in which the manufacturer’s collection effort is constrained by an exogenously mandated collection target. Our analysis examines the viability of refurbishment as a function of this target, the quality of the refurbished products, and the consumers’ willingness to wait. We reveal the following key insights: (1) Stringent collection targets can paradoxically suppress refurbishment activities by forcing manufacturers to collect beyond economically viable limits; (2) refurbishment becomes profitable only when the quality of refurbished products is sufficiently high to offset cannibalization effects on new product sales; (3) the impact of strategic consumers’ behavior on social welfare varies significantly across different compliance scenarios, with increased consumer patience sometimes reducing overall welfare; and (4) in competitive settings, a manufacturer’s all-collection strategy can serve as an effective barrier to entry against independent refurbishers. Our findings offer valuable insights for policymakers designing product take-back regulations and for manufacturers developing circular economy strategies in markets with strategic consumers.

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