Recycling Versus Leasing in Closed-Loop Supply Chain: A Comparative Analysis Anchored on Consumer Ownership Perceptions.

Manufacturers increasingly recycle end-of-life products to realize residual economic value and mitigate environmental impacts on the economic system. Concurrently, with the burgeoning growth of the product-service system, leasing models offer an alternative method to complete the material loop without direct collection. While prior research has delved into recycling channels, incentive mechanisms, and remanufacturing within closed-loop supply chain management, a comparative analysis between recycling and leasing strategies remains under-explored. This study seeks to bridge this gap by elucidating the manufacturer's strategic decision-making process, factoring in consumers' product ownership perceptions. We propose a manufacturer decision model anchored on consumer choices and segment it into three scenarios based on varying ownership perceptions. Our analysis contrasts market demand and profit outcomes across these scenarios. Notably, we discern that a hybrid strategy is optimal when ownership perception is low; however, when such perception is heightened, a dedicated recycling strategy proves more advantageous. Importantly, introducing a leasing option does not entirely overshadow the conventional sales market but is susceptible to being overshadowed itself. From a managerial standpoint, while integrating a leasing program might augment revenue streams, sole reliance on it is inadvisable. Furthermore, reshaping consumption paradigms to emphasize product functionality over ownership can pave the way for more expansive leasing strategies, optimizing revenue generation within a closed-loop framework. Plain Language Summary: This paper uses the consumer choice model and the decision model to analyze the two approaches for closing the loop, leasing and recycling. In contrast to previous studies of closed-loop supply chains, this paper considers leasing as another way of closing the loop and takes into account its cannibalization effect on the market for new products and its priming effect on consumers with lower willingness to pay. The paper concludes that the leasing strategy cannot completely cannibalize the selling market and is conditional on implementation, while the recycling strategy can completely cannibalize the leasing market and is always effective. This paper has some applications for closed-loop decision making for manufacturers to improve economic and environmental gains. Manufacturers and policy makers should advocate new forms of consumption that encourage consumers to care more about product function than property rights, thus leaving more room for the rental market to acquire greater benefits. This paper does not consider the supply of P2P platforms when portraying the leasing program and does not use empirical studies to verify the conclusions. [ABSTRACT FROM AUTHOR]