Effects of information asymmetry on green advertising for remanufacturing within a closed-loop supply chain

Abstract

Manufacturers invest in Green Advertising for Remanufacturing (GAR) to attract consumers by promoting the eco-friendly benefits of their remanufacturing. Despite this, the production of remanufactured products is often influenced by Third-Party Collectors (3PCs) which handle the collection of used products. Unfortunately, market responsiveness to GAR levels is undisclosed due to proprietary information, which leaves 3PCs to unreasonably set pricing and collection quantities, potentially leading to profit loss. To explore how a two-part tariff (TPT) contract menu facilitates 3PCs in acquiring information regarding the manufacturer's GAR effectiveness, a closed-loop supply chain comprising one manufacturer and one 3PC is taken into consideration. The optimal decisions are analyzed in three distinct decision-making scenarios: the centralized scenario, the complete information scenario, and the asymmetric information scenario. The research findings suggest that in the presence of information asymmetry, manufacturers with high GAR effectiveness (H-type manufacturers) are inclined to masquerade as manufacturers with low GAR effectiveness (L-type manufacturers). Consequently, H-type manufacturers gain additional profits due to information asymmetry. However, for the 3PC, information asymmetry leads to reduced expected profit when the manufacturer has high GAR effectiveness and increased expected profit when the manufacturer has low GAR effectiveness. Finally, our analysis demonstrates that information asymmetry does not consistently hurt consumer surplus.

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