Primary and secondary market strategies for regulatory compliance and profit
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Incorporating sustainability into operational strategies has gained tremendous momentum among firms. An important driver is the need to comply with environmental legislation that grows in both coverage and stringency. Moreover, many firms also come to recognize the value of establishing sustainable operations to enhance profitability, especially with its potential to be scaled up by the rapidly increasing volume of production and end-of-life products. In this dissertation, I study firms' sustainable operational strategies either for complying with legislation or for improving profitability. In the first essay (Chapter II), I point out that, although largely overlooked by the literature, increasing product durability can be utilized, in addition to recyclability, as a design lever when a durable product producer is imposed with the responsibility of end-of-life product management. The analysis reveals that when trade-off between the two design options exists, legislation can lead to surprising design outcomes. The second essay (Chapter III) studies the strategies of Testing and Remanufacturing as instruments for a durable product manufacturer to tackle the lemons problem. The lemons problem arises in secondary markets as the sellers, being the original owners of the used products, take advantage of the superior quality information to strategically sell the low-quality items to the secondary markets while keeping the high-quality ones. This study reveals the unexplored functionalities of conducting testing and remanufacturing in resolving the lemons problem, which take effects through enabling the manufacturer a stronger control over the secondary markets. The third essay (Chapter IV) builds upon these insights and proposes a framework to empirically study the effectiveness of the Testing and Remanufacturing strategies in dealing with the lemons problem in the used automobile markets.