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In light of a circular economy, to encourage core returns, the remanufacturer charges a deposit and refund it to the customer based on quality inspection of cores. Generally, two types of classification errors exist and interact with each other during the inspection process: either low-quality cores are sorted as remanufacturable, or high-quality cores are sorted as non-remanufacturable. The remanufacturer needs to choose refund policies and determine a reasonable deposit value, considering customers potential responses. This paper firstly develops analytical solutions for these issues within a game theory framework. The effect of inspection information transparency is evaluated by comparing two settings: the information of inspection errors is available to customers or not. The study results show the advantage of inspection information transparency from the remanufacturers perspective. The analysis indicates the importance of avoiding overestimating customers payoff of products and the significance of inspection accuracy. The study also highlights that the salvage value of different cores significantly influences the remanufacturers profits, and the improvement of inspection accuracy does not necessarily reduce the customers return of low-quality cores.

To encourage the return of cores, remanufacturers in practice commonly charge a certain amount of purchasing deposit, and refund it to the customer based on the result of quality inspection in the return process. Two types of classification errors exist and interact with each other during such an inspection process: either low quality cores are defined as remanufacturable; or high quality cores are defined non-remanufacturable. A remanufacturer has to choose a combination them and determine a proper deposit value, with the consideration of customers’ possible responses concerning purchasing and return behaviors. Within a game theory framework, the analytical solutions of these issues are firstly developed under the assumption that the customer has the inspection error information. When this information is not available, the solutions are analyzed with a given and fixed deposit. The value of information transparency in inspection errors is shown by comparing these two settings. The salvage value of different cores also has a great influence on the remanufacturer’s profit. In addition, the effect of conservatively estimating customers’ product payoff and the influences of improving inspection accuracy are investigated numerically. Interestingly, the customer may return more low quality cores when the inspection accuracy is improved.

In this paper, we develop a strategic decision model for a remanufacturer who faces the constraints of changing demands for remanufactured products and changing availability of cores. The remanufacturer decides on core collecting and remanufacturing to maximize its profit over the whole product life cycle. In the objective function, the remanufacturing cost is set as a convex decreasing function with respect to core inventory, to reflect the observations from industrial practice. Possible forms of the optimal control policies are analyzed using the optimal control theory. According to such properties and also the observations from numerical examples, a heuristic method is developed and shown to perform well. We further use this heuristic method in various numerical experiments with the background of component remanufacturing. According to the experiments, the remanufacturer should collect as many cores as possible in the beginning, with the exception of a high price of collecting cores; not all demand should be met at the beginning until enough cores are collected. In the late stage of the product life cycle, the time to stop collecting cores can be greatly affected by different remanufacturing costs and different life lengths of original products as well. Moreover, cores from failed parts need more attention than cores from disposed products, because they are more effective in balancing the demand for remanufactured products and the availability of cores.