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The joint dynamic green innovation and pricing strategies for a hybrid system of manufacturing and remanufacturing with carbon emission constraints

Zhichao Zhang (Anhui Science and Technology University, Chuzhou, China)
Bengang Gong (Anhui Polytechnic University, Wuhu, China)
Juan Tang (Anhui Polytechnic University, Wuhu, China)
Zhi Liu (Anhui Polytechnic University, Wuhu, China)
Xiaoxue Zheng (Fujian Agriculture and Forestry University, Fuzhou, China)

Kybernetes

ISSN: 0368-492X

Article publication date: 6 November 2018

Issue publication date: 23 September 2019

Abstract

Purpose

Under the carbon regulation mechanism, managing operational strategies is a challenging task. Green innovation is introduced into a hybrid system of manufacturing and remanufacturing to handle the carbon emission constraints in a dynamic market environment. This paper aims to investigate the joint dynamic green innovation policy and pricing strategies in a hybrid manufacturing and remanufacturing system.

Design/methodology/approach

This paper first considers a monopolistic manufacturer who offers brand-new products and remanufactured items at the same price to consumers. Subsequently, the authors extend their analyses to distinct pricing strategies for both newly manufactured products and refurnished ones in such a hybrid system. Two different cases are considered: a loose carbon emission constraint and a binding carbon emission constraint. By solving the dynamic optimization problem, the differential game and Pontryagin’s maximum principle are used to obtain the joint green innovation and pricing strategies.

Findings

The retail price first increases then declines over a single period. The green innovation diminishes in the same pricing decision model, while it first increases then declines in a distinct pricing decision model over a single planning horizon. The green innovation investment as well as the retail price are discouraged by an emission cap and recycling fraction. The distinct retail price fluctuates violently, and they are, in descending order of the highest peak price as follows: the newly manufactured product, the same pricing product and the repaired product. Carbon emission caps that are either too high or too low decrease the revenue of the manufacturer. A small emission constraint margin benefits the manufacturer. The recycling policy, as well as other parameters, affects whether the hybrid system attains the carbon emission constraint or not, which suggests that the recycling policy is complementary to the carbon emission constraint mechanism in the hybrid system.

Practical implications

These results offer managerial implications to the hybrid system in terms of green innovation, pricing strategies and recycling policy.

Originality/value

This paper is among the first papers to research the joint dynamic green innovation policy and pricing strategies with/without a carbon emission constraint in a hybrid manufacturing and remanufacturing system with a differential game. Moreover, this paper presents a potential way of investigating other common resource constraints by a differential game in a manufacturing/remanufacturing system or closed loop supply chain.

Keywords

Acknowledgements

The authors thank Professor Chen W. D., in Southeast University of China, the two anonymous reviewers and editors for their constructive comments and suggestions, which dramatically improve the paper. This paper is supported by National Natural Foundation of China (71801003 and 71671001), Philosophy and Social Science Programming Youth Project of Anhui province of China (AHSKQ12016D18), The Fourth Social Science and Pragmatic Measures in 2017 of Chuzhou, Anhui, China (A2017011) and Talent Introduction Project of Anhui Science and Technology University (GLYJ201701).

Citation

Zhang, Z., Gong, B., Tang, J., Liu, Z. and Zheng, X. (2019), "The joint dynamic green innovation and pricing strategies for a hybrid system of manufacturing and remanufacturing with carbon emission constraints", Kybernetes, Vol. 48 No. 8, pp. 1699-1730. https://doi.org/10.1108/K-06-2018-0339

Publisher

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Emerald Publishing Limited

Copyright © 2018, Emerald Publishing Limited