Dynamic pricing for new and remanufactured products in a closed-loop supply chain

• Published in: International journal of production economics Vol. 146; no. 1; pp. 153 - 160
• Main Authors: Chen, Jen-Ming, Chang, Chia-I
• Format: Journal Article
• Language: English
• Published: Amsterdam Elsevier B.V 01.11.2013; Elsevier Sequoia S.A
• Subjects: Closed-loop supply chain; Cost analysis; Dynamic programming; Economics; Effectiveness studies; Lagrange multiplier; Life-cycle assessment; Markets; Mathematical analysis; Mathematical models; Numerical analysis; Pricing; Product life cycle; Remanufacturing; Strategy; Supply chain management; Dynamic programming; Remanufacturing; Life-cycle assessment; Closed-loop supply chain; Pricing
• ISSN: 0925-5273; 1873-7579
• DOI: 10.1016/j.ijpe.2013.06.017

This study deals with managing two differentiated versions of the same product by developing analytical models using Lagrangean relaxation and dynamic programming schemes. We assume market demand is price-dependent and partially substitutable between the new and remanufactured goods, and supply of the returned cores is constrainted, i.e., the remanufacturable quantity in the present period is subject to the availability of end-of-use products in the previous period. The primary objective behind analytic formulation is to investigate the pricing behavior over time under a variety of parameter settings including market property, return rate, and substitutability. Analytical and numerical results reveal that the pricing strategy depends critically on the types of markets (e.g., different phases of product lifecycle), cost-savings of remanufactured products, and the substitutable coefficient. Furthermore, we show that the proposed pricing strategy is an effective mechanism in rendering a greater profit stream during the product lifecycle.