Effects of electronic product modularity on recovery strategy selection

¹ School of Management, Xi’an Jiaotong University, Xi’an, Shaanxi 710049, P.R. China
² ERC for Process Mining of Manufacturing Services in Shaanxi Province, Xi’an, Shaanxi 710049, P.R. China
³ Driehaus College of Business, DePaul University, Chicago, IL 60604, USA

^* Corresponding author: wangnm@mail.xjtu.edu.cn

Received: 14 March 2024
Accepted: 2 July 2025

Abstract

Modular design increases product reusability and boosts the circulation of resources. This paper investigates how modular design impacts manufacturer and retailer pricing decisions, and their collection efficiencies, across three recovery strategies: manufacturer monopoly recovery, cooperative recovery, and retailer monopoly recovery. Then, Stackelberg game models are proposed to analyze the optimal recovery strategies that balance economic goals (supply chain profits) and environmental objectives (collection quantity). The findings reveal that investing in modularity enhances both profitability and collection efficiency in all three strategies. When modularity is endogenous, manufacturer monopoly recovery achieves a higher optimal modularity level than cooperative recovery, indicating a need for greater investment when manufacturers have more control over recovery. With exogenous modularity, the preferred recovery strategy depends on the level of modularity: manufacturer monopoly recovery is optimal for moderate modularity, delivering both the highest collection quantity and supply chain profits. As modularity increases, manufacturer monopoly recovery achieves higher collection quantity, while retailer monopoly recovery maximizes supply chain profits. Overall, a monopoly recovery approach leverages the benefits of high modularity more effectively than a cooperative strategy, yielding superior economic and environmental outcomes. Our models offer insights into improving recovery business efficiency through modular design and diversified disposal options.