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Chinese Journal of Management Science ›› 2017, Vol. 25 ›› Issue (11): 111-121.doi: 10.16381/j.cnki.issn1003-207x.2017.11.012

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Optimal Pricing for New and Remanufactured Products Based on the Competition Between OEM and IR

MENG Li-jun, HUANG Zu-qing, ZHANG Bao-you, YANG Yu-xiang   

  1. School of Economics and Management, China Jiliang University, Hangzhou 310018, China
  • Received:2016-02-16 Revised:2017-01-18 Online:2017-11-20 Published:2018-01-31

Abstract: The residual value inherent in used products can make remanufacturing a profitable activity for OEMs, so many OEMS choose to sell remanufactured products. At the same time, there may be third-parties remanufacturers that remanufacture the used products originally sold by the OEM. However, in the academic field of closed-loop supply chain,thus far, few researches has been conducted on investigating the optimal pricing problem of new product and differentiated remanufactured product. In this paper, a two-period game-theoretic model with a monopolist manufacturer in the first period and duopoly of manufacturer and independent remanufacturer in the second period is developed. It is assumed that the OEM may remanufacture the used product returned by customer while manufacturing new product and the third-party remanufacturer competes with the manufacturer by remanufacturing the used product too. It is also assumed that customer's willingness to pay for remanufactured products is less than their willingness to pay for new products. Based on these assumptions, a Stackelberg game is employed to analyzed the OEM and independent remanufacture 's pricing strategies where the former act as the leader and the latter act as a follower.The optimal pricing strategies for the OEM and IR are obtained. The results suggest that, the OEM can use his first period price to blunt the independent remanufacturer's ability to compete in period 2. Based on numerical study, our results show the reduced remanufacturing cost of IR does not influence on the OEM's profitability and its optimal pricing strategy for new products. There exists a threshold on the valuation of remanufactured product for the monopolist. If the valuation is too low, OEM brings its own loss of profits while preventing IR into the market. If the valuation of remanufactured product, IR competes with OEM, that reducing the OEM's profit. These results can help the OEM to choose the optimal pricing strategy for its product to enhance his profit, and give some suggestion on how to guide the consumer perception of remanufactured product for OEM.

Key words: remanufactured product, pricing strategy, value, game theory

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