Firm remanufacturing and product distinction decisions: The implications of servitization implementation

In the context of a circular economy, firms face numerous challenges and uncertainties in balancing economic benefits with environmental sustainability through remanufacturing and servitization. To address this, we construct a three-dimensional analytical framework that integrates remanufacturing, product distinction decisions, and the servitization business model. Based on a game-theoretic model, we examine the optimal strategic choices for a firm under both pure sales and servitization (sales and service) models. The findings reveal that, first, the optimal strategy for the firm is driven by the production cost of new products and consumer usage concerns. When production costs are moderate, the firm can maximize profits through price discrimination by clearly distinguishing new products from remanufactured ones. However, the implementation of servitization will narrow the applicability of this strategy. Interestingly, an increase in consumer usage concerns tends to lead the firm to avoid distinguishing between product types. Secondly, servitization remains profitable at low costs, and it does not inhibit the firm's remanufacturing activities. Instead, by blurring product differences, it prompts the firm to adopt mixed sales strategies, fueling this implicit remanufacturing business practice. Finally, achieving environmental benefits requires a precise match between product characteristics and the level of remanufacturing technology improvement. When remanufacturing technology meets the corresponding conditions and production costs fall within a specific range, the coordinated deployment of servitization and remanufacturing can achieve a Pareto improvement in both economic and environmental benefits. The research findings provide new insights into multi-strategy collaborative decision-making in circular economy practices.