This paper studies risk aversion and retail service in third-party remanufacturing. We consider a closed-loop supply chain (CLSC) comprising an original equipment manufacturer (OEM), a risk-averse retailer, and a third-party remanufacturer (TPR). The retailer sells new products and provides retail services. The TPR is responsible for the remanufacturing. Two Stackelberg game models are developed: authorized remanufacturing (Model A) and outsourcing remanufacturing (Model O). Based on the analysis results, we can conclude that in response to risk aversion, the OEM raises the outsourcing fee to incentivize remanufacturing and increase the TPR's expected profit. The retailer reduces service level due to risk aversion, but appropriate risk aversion could help the retailer optimize expected profit. Under certain parameter conditions, an increase in recycling difficulty may elevate the TPR's expected profit due to a higher outsourcing fee. The retailer provides a higher service level and achieves greater expected profit under Model A, while the OEM prefers Model O. The TPR prefers Model O only when both the market recognition of remanufactured products and the recycling difficulty coefficient are sufficiently high. Model O is more environmentally friendly when the unit remanufactured product environmental impact is sufficiently low. Supply-chain expected environmental impact negatively correlates with retailer risk aversion level, while recycling difficulty's environmental impact depends on the environmental performance of the unit remanufactured product. We recommend that the retailer, while optimizing service costs, should promptly understand the respective bargaining power of the OEM and TPR in negotiations over remanufacturing model selection to avoid the risk of high service efficiency leading the TPR to accept model O, which is disadvantageous to the retailer. The government should support TPR in enhancing recycling efficiency while encouraging the retailer to improve the effectiveness of retail services. This study provides a scientific reference for operational decision-making and remanufacturing cooperation model selection in third-party remanufacturing CLSCs with retail service and risk aversion issues. Furthermore, our findings contribute theoretical foundations for policymakers to formulate policies that balance economic development and environmental benefits.
Citation: Zichun Deng, Mohd Rizaimy Shaharudin, S. Sarifah Radiah Shariff, Ming-Lang Tseng. Decision-making of third-party remanufacturing supply chain with risk aversion and retail service[J]. Journal of Industrial and Management Optimization, 2026, 22(4): 1693-1725. doi: 10.3934/jimo.2026063
This paper studies risk aversion and retail service in third-party remanufacturing. We consider a closed-loop supply chain (CLSC) comprising an original equipment manufacturer (OEM), a risk-averse retailer, and a third-party remanufacturer (TPR). The retailer sells new products and provides retail services. The TPR is responsible for the remanufacturing. Two Stackelberg game models are developed: authorized remanufacturing (Model A) and outsourcing remanufacturing (Model O). Based on the analysis results, we can conclude that in response to risk aversion, the OEM raises the outsourcing fee to incentivize remanufacturing and increase the TPR's expected profit. The retailer reduces service level due to risk aversion, but appropriate risk aversion could help the retailer optimize expected profit. Under certain parameter conditions, an increase in recycling difficulty may elevate the TPR's expected profit due to a higher outsourcing fee. The retailer provides a higher service level and achieves greater expected profit under Model A, while the OEM prefers Model O. The TPR prefers Model O only when both the market recognition of remanufactured products and the recycling difficulty coefficient are sufficiently high. Model O is more environmentally friendly when the unit remanufactured product environmental impact is sufficiently low. Supply-chain expected environmental impact negatively correlates with retailer risk aversion level, while recycling difficulty's environmental impact depends on the environmental performance of the unit remanufactured product. We recommend that the retailer, while optimizing service costs, should promptly understand the respective bargaining power of the OEM and TPR in negotiations over remanufacturing model selection to avoid the risk of high service efficiency leading the TPR to accept model O, which is disadvantageous to the retailer. The government should support TPR in enhancing recycling efficiency while encouraging the retailer to improve the effectiveness of retail services. This study provides a scientific reference for operational decision-making and remanufacturing cooperation model selection in third-party remanufacturing CLSCs with retail service and risk aversion issues. Furthermore, our findings contribute theoretical foundations for policymakers to formulate policies that balance economic development and environmental benefits.
| [1] |
J. M. Framinan, An analysis of the supply chain dynamics of remanufacturing with multiple collectors, Int. J. Product. Econ., 267 (2024), 109071. https://doi.org/10.1016/j.ijpe.2023.109071 doi: 10.1016/j.ijpe.2023.109071
|
| [2] |
J. Xu, Q. Bai, Z. Li, L. Zhao, Maximizing the profit of omnichannel closed-loop supply chains with mean–variance criteria, Comput. Ind. Eng., 113 (2024), 109030. https://doi.org/10.1016/j.compeleceng.2023.109030 doi: 10.1016/j.compeleceng.2023.109030
|
| [3] |
Y. Chen, F. Chen, On the competition between two modes of product recovery: Remanufacturing and refurbishing, Prod. Oper. Manag., 28 (2019), 2983−3001. https://doi.org/10.1111/poms.13082 doi: 10.1111/poms.13082
|
| [4] |
J. Zhao, C. Wang, L. Xu, Decision for pricing, service, and recycling of closed-loop supply chains considering different remanufacturing roles and technology authorizations, Comput. Ind. Eng., 132 (2019), 59−73. https://doi.org/10.1016/j.cie.2019.04.019 doi: 10.1016/j.cie.2019.04.019
|
| [5] | C. P. Baldé, R. Kuehr, T. Yamamoto, R. McDonald, E. D'Angelo, S. Althaf, et al., Global E-waste Monitor 2024, International Telecommunication Union (ITU) and United Nations Institute for Training and Research (UNITAR), 2024. Available from: https://ewastemonitor.info/the-global-e-waste-monitor-2024/. |
| [6] |
X. Wu, Y. Zhou, Buyer-specific versus uniform pricing in a closed-loop supply chain with third-party remanufacturing, Eur. J. Oper. Res., 273 (2019), 548−560. https://doi.org/10.1016/j.ejor.2018.08.028 doi: 10.1016/j.ejor.2018.08.028
|
| [7] |
Y. Zhang, W. Chen, Q. Li, Third-party remanufacturing mode selection for a capital-constrained closed-loop supply chain under financing portfolio, Comput. Ind. Eng., 157 (2021), 107315. https://doi.org/10.1016/j.cie.2021.107315 doi: 10.1016/j.cie.2021.107315
|
| [8] |
Z. B. Zou, J. J. Wang, G. S. Deng, H. Chen, Third-party remanufacturing mode selection: Outsourcing or authorization? Transport. Res. Part E: Logist. Transport. Rev., 87 (2016), 1−19. https://doi.org/10.1016/j.tre.2015.12.008 doi: 10.1016/j.tre.2015.12.008
|
| [9] |
J. Ding, X. Pu, W. Zhang, Outsourcing vs. authorization remanufacturing and differential vs. uniform pricing: A supply chain perspective, Transport. Res. Part E: Logist. Transport. Rev., 192 (2024), 103777. https://doi.org/10.1016/j.tre.2024.103777 doi: 10.1016/j.tre.2024.103777
|
| [10] | Suning, Suning. com Max Store Integrates Deepseek! LingSi AI Store Assistant Officially Launches, 2025. Available from: http://www.suning.cn/cms/latestNews/26973.htm. |
| [11] | Z. Liu, L. Hu, W Yeh, Risk-averse two-stage stochastic programming-based closed-loop supply chain network design under uncertain demand, Appl. Soft Comput., 147 (2023), 110743. https://doi.org/10.1016/j.asoc.2023.110743 |
| [12] |
J. Gao, H. Han, L. Hou, H. Wang, Pricing and effort decisions in a closed-loop supply chain under different channel power structures, J. Clean. Prod., 112 (2016), 2043−2057. https://doi.org/10.1016/j.jclepro.2015.01.066 doi: 10.1016/j.jclepro.2015.01.066
|
| [13] |
S. Qu, L. Shu, J. Yao, Optimal pricing and service level in supply chain considering misreport behavior and fairness concern. Comput. Ind. Eng., 174 (2022), 108759. https://doi.org/10.1016/j.cie.2022.108759 doi: 10.1016/j.cie.2022.108759
|
| [14] |
D. Gong, H. Gao, L. Ren, X. Yan, Consumers' free riding: Pricing and retailer service decisions in a closed-loop supply chain, Comput. Ind. Eng., 181 (2023), 109285. https://doi.org/10.1016/j.cie.2023.109285 doi: 10.1016/j.cie.2023.109285
|
| [15] |
K. Cai, Z. He, Y. Lou, S. He, Risk-aversion information in a supply chain with price and warranty competition. Ann. Oper. Res., 287 (2020), 61−107. https://doi.org/10.1007/s10479-019-03386-w doi: 10.1007/s10479-019-03386-w
|
| [16] |
M. Liu, E. Cao, C. K. Salifou, Pricing strategies of a dual-channel supply chain with risk aversion, Transport. Res. Part E: Logist. Transport. Rev., 90 (2016), 108−120. https://doi.org/10.1016/j.tre.2015.11.007 doi: 10.1016/j.tre.2015.11.007
|
| [17] |
X. Xia, W. Chen, B. Liu, Optimal production and financing strategies for capital-constrained closed-loop supply chain under risk aversion, Kybernetes, 52 (2023), 2770−2809. https://doi.org/10.1108/K-09-2021-0923 doi: 10.1108/K-09-2021-0923
|
| [18] | J. Ding, Y. Wang, T. Tuerxun, The impact of risk aversion on remanufacturing supply chain decisions under quality uncertainty, Kybernetes. 55 (2026), 806–824. https://doi.org/10.1108/K-07-2024-1976 |
| [19] | Q. Zhou, C. Meng, KF. Yuen, Remanufacturing authorization strategy for competition among OEM, authorized remanufacturer, and unauthorized remanufacturer, Int. J. Product. Econ., 242 (2021), 108295. https://doi.org/10.1016/j.ijpe.2021.108295 |
| [20] |
N. Wang, Y. Zhang, J. Li, Carbon emission reduction and coordination in a closed-loop supply chain with outsourcing remanufacturing, Kybernetes, 51 (2022), 3366−3393. https://doi.org/10.1108/K-11-2020-0800 doi: 10.1108/K-11-2020-0800
|
| [21] |
X. Xia, M. Lu, W. Wang, Emission reduction and outsourcing remanufacturing: A comparative study under carbon trading, Expert Syst. Appl., 227 (2023), 120317. https://doi.org/10.1016/j.eswa.2023.120317 doi: 10.1016/j.eswa.2023.120317
|
| [22] |
Z. Liu, J. Ren, M. Wan, J. Cao, Financing strategies for a textile and apparel remanufacturing supply chain with the delay in disbursement subsidies, J. Clean. Prod., 437 (2024), 140745. https://doi.org/10.1016/j.jclepro.2024.140745 doi: 10.1016/j.jclepro.2024.140745
|
| [23] |
G. Esenduran, M. Jin, Y. Zhou, Laissez-Faire vs. Government Intervention: Implications of Regulation Preventing Nonauthorized Remanufacturing, Manuf. Serv. Oper. Manag., 27 (2025), 588−606. https://doi.org/10.1287/msom.2023.0128 doi: 10.1287/msom.2023.0128
|
| [24] |
P. Ma, M. Li, Operational and financing decisions of original equipment manufacturers under third-party remanufacturing modes, Comput. Ind. Eng., 183 (2023), 109508. https://doi.org/10.1016/j.cie.2023.109508 doi: 10.1016/j.cie.2023.109508
|
| [25] |
B. Li, J. Tang, Z. Liu, B. Gong, Remanufacturing mode selection considering uncertain EOL products' quality and differential consumers' WTP, Kybernetes, 53 (2024), 358−383. https://doi.org/10.1108/K-03-2022-0428 doi: 10.1108/K-03-2022-0428
|
| [26] |
X. Xia, J. Chen, W. Wang, H. Wang, Impact of differentiated carbon taxes on remanufacturing mode selection, Energy Econ., 140 (2024), 107955. https://doi.org/10.1016/j.eneco.2024.107955 doi: 10.1016/j.eneco.2024.107955
|
| [27] |
H. Qiao, X. Xu, Replacement program decision-making and remanufacturing model selection considering consumer segmentation, J. Ind. Manag. Optim., 21 (2025), 1145−1175. https://doi.org/10.3934/jimo.2024119 doi: 10.3934/jimo.2024119
|
| [28] |
Y. Xia, T. Xiao, G. P. Zhang, Service investment and channel structure decisions in competing supply chains, Serv. Sci., 11 (2019), 57−74. https://doi.org/10.1287/serv.2018.0235 doi: 10.1287/serv.2018.0235
|
| [29] |
S. Zhang, B. Dan, M. Zhou, After-sale service deployment and information sharing in a supply chain under demand uncertainty, Eur. J. Oper. Res., 279 (2019), 351−363. https://doi.org/10.1016/j.ejor.2019.05.014 doi: 10.1016/j.ejor.2019.05.014
|
| [30] |
Z. Guan, X. Zhang, M. Zhou, Y. Dan, Demand information sharing in competing supply chains with manufacturer-provided service, Int. J. Product. Econ., 220 (2020), 107450. https://doi.org/10.1016/j.ijpe.2019.07.023 doi: 10.1016/j.ijpe.2019.07.023
|
| [31] |
Y. Zhang, M. S. Han, K. Wang, Symmetric or asymmetric? Value-added service design for new and remanufactured products under competition, Int. J. Product. Econ., (2025), 109682. https://doi.org/10.1016/j.ijpe.2025.109682 doi: 10.1016/j.ijpe.2025.109682
|
| [32] |
X. Hong, L. Wang, Y. Gong, W. Chen, What is the role of value-added service in a remanufacturing closed-loop supply chain? Int. J. Product. Res., 58 (2020), 3342−3361. https://doi.org/10.1080/00207543.2019.1702230 doi: 10.1080/00207543.2019.1702230
|
| [33] |
R. Shan, L. Luo, R. Kou, Cost-sharing strategy for recycling and service investment in a closed-loop supply chain, RAIRO Oper. Res., 55 (2021), 2963−2990. https://doi.org/10.1051/ro/2021143 doi: 10.1051/ro/2021143
|
| [34] |
W. Shi, H. Chen, X. Zhang, C. Ma, Optimal Alliance Strategy and Its Impact in a Closed‐Loop Supply Chain by considering Greenness and Service Effort, Math. Probl. Eng., 1 (2021), 6676482. https://doi.org/10.1155/2021/6676482 doi: 10.1155/2021/6676482
|
| [35] |
R. Gong, J. Xue, R. Liu, J. Zhou, L. Zhao, A closed‐loop supply chain decision model considering corporate social responsibility and value‐added services, Manag. Decis. Econ., 43 (2022), 1704−1720. https://doi.org/10.1002/mde.3481 doi: 10.1002/mde.3481
|
| [36] |
J. Zhang, What is the role of product services in the dual-channel closed-loop supply chain? RAIRO Oper. Res., 58 (2024), 3637−3658. https://doi.org/10.1051/ro/2023183 doi: 10.1051/ro/2023183
|
| [37] |
W. Deng, Sustainable development: Impacts of consumers' risk aversion on remanufacturing model selection and environmental performance, Sustain. Dev., 28 (2020): 1564−1574. https://doi.org/10.1002/sd.2105 doi: 10.1002/sd.2105
|
| [38] |
B. Niu, H. Xu, L. Chen, Creating all-win by blockchain in a remanufacturing supply chain with consumer risk-aversion and quality untrust, Transport. Res. Part E: Logist. Transport. Rev., 163 (2022), 102778. https://doi.org/10.1016/j.tre.2022.102778 doi: 10.1016/j.tre.2022.102778
|
| [39] |
J. Xu, Q. Bai, Q. Luo, Energy conservation strategy and coordination of a closed-loop supply chain with risk-averse members under carbon tax regulation, Oper. Res., 23 (2023), 52. https://doi.org/10.1007/s12351-023-00793-7 doi: 10.1007/s12351-023-00793-7
|
| [40] |
H. Song, Q. Li, Decision-making in closed-loop supply chains: Effects of government subsidies and risk aversion, Int. Rev. Financ. Anal., 96 (2024), 103566. https://doi.org/10.1016/j.irfa.2024.103566 doi: 10.1016/j.irfa.2024.103566
|
| [41] |
B. Gong, Z. Li, J. Cheng, X. Zhang, Closed-loop supply chain decisions considering carbon tax policy under the recycler's risk aversion, Ann. Oper. Res., 55 (2025), 1851–1876. https://doi.org/10.1007/s10479-025-06671-z doi: 10.1007/s10479-025-06671-z
|
| [42] |
F. Zhou, C. Zhang, S. Tiwari, X. Huang, S. Pratap, Decision and coordination of WEEE closed-loop supply chain with risk aversion under the cap-and-trade regulation, Int. J. Product. Econ., 280 (2025), 109477. https://doi.org/10.1016/j.ijpe.2024.109477 doi: 10.1016/j.ijpe.2024.109477
|
| [43] |
X. Xia, Y. Nan, Pricing Decision and Financing Approach Selection of Fund‐Deficient Closed‐Loop Supply Chain under Distributor's Risk Aversion, Math. Probl. Eng., 1 (2022), 3077833. https://doi.org/10.1155/2022/3077833 doi: 10.1155/2022/3077833
|
| [44] |
J. Cao, Q. Shao, Outsourcing and authorized remanufacturing under voluntary emission reduction mechanism. Flex. Serv. Manuf. J., 37 (2024), 776–815. https://doi.org/10.1007/s10696-024-09555-9 doi: 10.1007/s10696-024-09555-9
|
| [45] | B. Niu, Z. Zou, Better demand signal, better decisions? Evaluation of big data in a licensed remanufacturing supply chain with environmental risk considerations, Risk Anal., 37 (2017), 1550–1565. https://doi.org/10.1111/risa.12796 |
| [46] |
B. Zheng, L. Jin, Relicensing scheme selection in closed-loop supply chains with differentiated new and remanufactured products, Comput. Ind. Eng., 171 (2022): 108443. https://doi.org/10.1016/j.cie.2022.108443 doi: 10.1016/j.cie.2022.108443
|
| [47] |
X. Xia, W. Chen, B. Liu, Optimal production decision and financing strategy for a capital-constrained closed loop supply chain under fairness concern, J. Clean. Prod., 376 (2022), 134256. https://doi.org/10.1016/j.jclepro.2022.134256 doi: 10.1016/j.jclepro.2022.134256
|
 jimo-22-04-063-supplementary.pdf |
 |
Figures(23) / Tables(2)
Zichun Deng, Mohd Rizaimy Shaharudin, S. Sarifah Radiah Shariff, Ming-Lang Tseng. Decision-making of third-party remanufacturing supply chain with risk aversion and retail service[J]. Journal of Industrial and Management Optimization, 2026, 22(4): 1693-1725. doi: 10.3934/jimo.2026063
DownLoad: