On building remanufacturing outsourcing strategies under recycling competition and government subsidies in closed-loop supply chains

School of Economics and Management, Harbin University of Science and Technology, Harbin 150080, P.R. China

^* Corresponding author: sjy_sjx@163.com

Received: 30 May 2024
Accepted: 28 May 2025

Abstract

Based on the competition in the recycling market, this paper investigates the technology licensing outsourcing strategy and the remanufacturing strategy of a closed-loop supply chain, and analyses the effect of the implementation of government subsidy policies. This paper considers a closed-loop supply chain consisting of a manufacturer, a retailer and two competing recyclers (one specializing in sorted recycling and the other in traditional recycling). Using the Stackelberg game model, eight decision-making models under different outsourcing modes, remanufacturing modes and government subsidies are constructed. Through the comparative analysis of the equilibrium results, the optimal outsourcing authorization and remanufacturing strategies for the closed-loop supply chain are proposed, and the facilitating effect of the government’s double subsidy policy is verified. Our findings show that manufacturers tend to choose the unit-pay outsourcing model in outsourcing and remanufacturing decisions, although this may lead to profit inequality among other members. Meanwhile, increasing government subsidies for sorted recycling and remanufacturing favors the profitability of sorted recyclers, however, it is of concern that this is not conducive to increasing the profitability of traditional recyclers. Furthermore, at low recycling prices, an increase in dual subsidies is beneficial in boosting market demand and profits for all members, however, at high recycling prices, the equilibrium outcomes and member profits change in the opposite direction as under the fixed-pay outsourcing model. We also find that government inputs of double subsidies can increase member profits, promote recycling and remanufacturing, and maintain market stability, especially the fixed-pay outsourcing versus full remanufacturing model is more conducive to achieving these objectives. The research in this paper contributes to the construction and development of the remanufacturing cycle system in the market.