Abstract: A closed-loop supply chain (CLSC) with an original equipment manufacturer (OEM) and consumers is considered. Based on the "quality-price" dual-competition between the new products and remanufactured ones, the influence of quality cost on the OEM decisions and its performance is studied. The results show that: 1) the quality cost has a significant impact on the product quality strategy of OEM. There is a threshold value of the quality cost coefficient. If the quality cost is lower than the threshold, OEM will choose the strategy of keeping remanufactured products and new ones the same in price dimension but different in quality dimension; otherwise, OEM will choose the strategy of keeping both the quality and price of remanufactured products different from those of new ones; 2) Whether there exists quality difference between new ones and remanufactured ones has no effect on the total demand, but only affects market share; 3) For the sake of environmental protection, in order to stimulate the demand of the remanufactured products, government intervention is necessary to compensate the loss of enterprise profits; 4) the quality of remanufactured products is not necessarily inferior to that of new ones. Under certain conditions, the quality of remanufactured products is superior to that of new ones, and this quality advantage increases with quality cost increasing.

Key words: closed-loop supply chain, quality decision, pricing strategy, quality cost