Remanufacturing, Third-Party Competition, and Consumers' Perceived Value of New Products

Abstract:

We investigate whether and how the presence of remanufactured products and the identity of the remanufacturer influence the perceived value of new products through a series of behavioral laboratory experiments. Our results demonstrate that the presence of products remanufactured and sold by the Original Equipment Manufacturer (OEM) reduces the perceived value of new products in the absence of a third-party remanufacturer. This finding is driven by consumers' quality concerns about the new products, which arise from the presence of such OEM-remanufactured products. However, this negative effect of OEM-remanufactured products is weakened by the presence of a third-party remanufacturer. The results suggest that this is because third-party remanufactured products serve as a quality cue for new products, increasing their perceived value. Existing literature has primarily argued that the presence of third-party remanufacturers is detrimental for OEMs and that OEMs should undertake preemptive remanufacturing to deter such competition. Our experimental results suggest that third-party competition may actually be beneficial for an OEM due to the positive effect of third-party remanufactured products on the perceived value of new products. We also develop an analytical model based on our experimental results to investigate when an OEM should not preempt third-party remanufacturers.

Biography:

Atalay Atasu is an Assistant Professor of Operations Management at Georgia Tech College of Management. He earned a Ph.D. in Management from INSEAD in 2007. His research is on sustainable operations management, with particular focus on product recovery economics and take-back legislation.  His research has been published in Management Science, Production and Operations Management, and California Management Review. He has received research awards such as the Production and Operations Management Society’s Wickham Skinner Best Paper Award in 2007, and Georgia Tech’s Lloyd Byars Faculty Excellence Award in 2011. He is a currently a Senior Editor for POM, and co-editor of a special issue on Extended Producer Responsibility for the Journal of Industrial Ecology.

To register please send an email to: beate.linnenberg(at)klu.org

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