Co-opetition strategies of prefabricated building manufacturers and remanufacturers under conditions of emissions cap and trade: a game-theory modeling approach

Purpose Prefabricated building manufacturers (PBMs) are compelled to invest in emission reduction practices to satisfy carbon emission restriction regulations. Emission regimes utilize two main systems, being “carbon emissions caps” (cap) and “carbon emissions trading” (trade). This paper aims to provide the production and emission reduction strategies for PBM to deal with challenges of the “cap” and “trade” regulations and remanufacturing competition. Design/methodology/approach This paper develops a game model comprised of a PBM and a competitive prefabricated building remanufacturer (PBR) engaged dynamically under conditions of “cap” and “trade”. Additionally, it constructs cost-sharing and licensing models for cooperation. Considering the constraints of new components’ production on the remanufacturing output, this paper employs Karush–Kuhn–Tucker (KKT) conditions and game theory to identify optimal solutions. Findings The results show that when cost savings for remanufacturing are moderate and the cost of emissions reduction is sufficiently low, stronger competition can induce PBM to reduce emissions further. Adopting a cost-sharing strategy is not only beneficial for the environment but can also result in increased profits for both PBM and PBR, when the carbon trading price is sufficiently high. A licensing strategy can also help PBM to reduce emissions and counter the competition of PBR, but it decreases PBR's profit. Originality/value This paper focuses on examining emissions reduction investment as well as identifying which strategies prove more beneficial for PBM and PBR in a competitive remanufacturing system.