The Impact of Take-Back Legislation on Remanufacturing
Speaker
Abstract
| We consider an original equipment manufacturer (OEM) in an industry regulated with take-back legislation that holds the OEM responsible for either taking back and properly treating products that reach the end of their life cycles or facilitating such take back and proper treatment through third parties. We use a stylized model of take-back legislation and consider three levels of legislation (no take-back legislation, legislation on collection levels, legislation on collection and reuse levels) in two different supply-chain settings. We aim to understand whether legislation causes an increase in remanufacturing levels and if it can induce OEMs to manufacture products that are easier and cheaper to remanufacture. We first analyze the effects of legislation on an OEM with in-house remanufacturing capabilities. We find that if the manufacturing cost is very low, legislation on collection levels does not induce remanufacturing while if the cost is high, legislation may be redundant. While take-back legislation never causes a decrease in remanufacturing levels, it may cause an increase in the price of remanufactured goods and a decrease in the level of new-product manufacturing. If the OEM does not remanufacture in-house and competes with a third-party remanufacturer instead, contrary to our earlier result, we find that legislation may cause a decrease in remanufacturing levels. But surprisingly, when we compare the effect of legislation on an OEM with in-house remanufacturing versus one competing with third-parties, remanufacturing levels may be higher in the latter for the same level of legislation. Finally we find that take-back legislation does induce OEMs to manufacture products that are easier and cheaper. |
| Contact information: |
| Dr. K.J. Roodbergen |
