LAUSR

Abstract The potential for the cannibalization of new-product sales by remanufactured products is a central issue in the continuing development of closed-loop supply chains. Therefore, this paper focuses on this issue and then considers a centralized system consisting of a manufacturer and a retailer, in which returned products are repaired and resold as green remanufactured items in the second selling period. Using a consumer utility model, we formulate how consumers will make choices when faced with both new and green remanufactured products. For the whole system, the optimal pricing and production decisions are investigated with and without remanufacturing activity. Our main findings are: (i) the optimal price of the new product should remain unchanged in the second selling period if the supply of remanufactured products can match the demand; (ii) remanufacturing activity can increase the whole system's green profits despite cannibalizing new product sales; and (iii) the whole system can achieve more green profits if it can provide consumers with their first-choice product (i.e., the supply of remanufactured products can match demand).