The Potential for Cannibalization of New Products Sales by Remanufactured Products

The potential for the cannibalization of new product sales by remanufactured versions of the same product is a central issue in the continuing development of closed-loop supply chains. We investigate the cannibalization question via auctions of new and remanufactured consumer and commercial goods. These auctions allow us to explore the impact of offering new and remanufactured products at the same time, which provides insights into the potential for cannibalization. Our results indicate that for the consumer and commercial products auctioned, there is a clear difference in the willingness-to-pay for new and remanufactured goods. For the consumer product, there is scant overlap in bidders between the new and remanufactured products, suggesting that the risk of cannibalization in this case is minimal. The commercial product exhibits some evidence of overlap in bidding behavior, exposing a greater potential for cannibalization. We also present guidelines for incorporating these results into future P/OM models.