Product innovation for remanufacturing, beginning at the development stage, has become an important strategic decision in third-party remanufacturing. This study investigates decision-making on product innovation for remanufacturing under two third-party remanufacturing modes and examines how original equipment manufacturers (OEMs) and remanufacturers respond. Results show that outsourcing remanufacturing consistently offers a wider profitability range for the OEM and increases the likelihood of the remanufacturer adopting a full remanufacturing strategy. Furthermore, a higher innovation level enhances OEM profits, particularly when the remanufacturing industry is mature or when the innovation investment efficiency is high. Otherwise, incremental innovation is more beneficial. Innovation also lowers entry barriers for remanufacturers. Finally, the authorization remanufacturing is initially more environmentally friendly, whereas the outsourcing mode becomes superior as the innovation level increases.

In outsourcing remanufacturing, the Original Equipment Manufacturer (OEM) is responsible for product design and sales, while the Third-Party Remanufacturer (TPR) undertakes remanufacturing operations. The separation of responsibilities often leads to incentive misalignment and hinders industry development. Government subsidies are critical for mitigating this conflict, and gradual subsidy phase-out has become a common policy trend. Therefore, this paper constructs a game-theoretic model between the OEM and the TPR under outsourcing remanufacturing. Innovation, production, and consumption subsidies are integrated into a unified analytical framework. Their impacts are systematically analyzed and compared. The subsidy phase-out is captured through detailed analysis across different subsidy intervals, leading to a piecewise equilibrium structure that reflects firms’ strategic adjustments as subsidy intensity declines. The results indicate that innovation subsidies primarily incentivize the OEM to enhance design for remanufacturing but have a limited impact on production and pricing decisions of both the OEM and TPR. Conversely, production and consumption subsidies significantly affect the TPR’s market entry strategies, exhibiting phasic characteristics during the phase-out process. Further comparison reveals that production and consumption subsidies are more effective in promoting the expansion of remanufacturing scale. The innovation subsidies are more advantageous for improving carbon efficiency and achieving long-term emission reduction in the mature stages of the industry.