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Selling Assortments of Used Products to Third‐Party Remanufacturers

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  • Akshay Mutha
  • Saurabh Bansal
  • V. Daniel R. Guide

Abstract

This paper analyzes the business‐to‐business transactions in which a supplier sells assortments of used products to third‐party remanufacturers. The supplier offers used products in different quality conditions, called grades. We model this buyer–supplier transaction as a Stackelberg game in which the buyer chooses his optimal purchase quantity of various grades, and the supplier chooses the optimal assortment and the prices of the grades in the assortment anticipating buyer’s behavior. We first develop an analytically tractable solution to the buyer’s and supplier’s problems. Subsequently, we show several structural properties of the optimal assortment offered by the supplier, including (i) the optimal prices set by the supplier are such that high quality grades have a higher profit margin for the buyer; and (ii) the grades in the optimal assortment constitute a convex hull of the remanufacturing and acquisition costs. We also extend the results to the case when the supplier’s acquisition costs are marginally increasing in the quantity acquired.

Suggested Citation

  • Akshay Mutha & Saurabh Bansal & V. Daniel R. Guide, 2019. "Selling Assortments of Used Products to Third‐Party Remanufacturers," Production and Operations Management, Production and Operations Management Society, vol. 28(7), pages 1792-1817, July.
    • Handle: RePEc:bla:popmgt:v:28:y:2019:i:7:p:1792-1817
    DOI: 10.1111/poms.13004
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    Cited by:

    1. Qiangfei Chai & Yiming Li & Zhongdong Xiao & Kee-hung Lai, 2022. "Optimal Carbon Abatement Strategy for Manufacturers under Cap-and-Trade," IJERPH, MDPI, vol. 19(17), pages 1-21, September.
    2. Kleber, Rainer & Reimann, Marc & Souza, Gilvan C. & Zhang, Weihua, 2020. "Two-sided competition with vertical differentiation in both acquisition and sales in remanufacturing," European Journal of Operational Research, Elsevier, vol. 284(2), pages 572-587.
    3. Xiaole Dou & Zenglu Li & Chun Liu, 2022. "Secondhand product quality disclosure strategy of the retailer under different supply chain structures," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(7), pages 2982-2999, October.
    4. Das, Debabrata & Dutta, Pankaj, 2022. "Product return management through promotional offers: The role of consumers’ loss aversion," International Journal of Production Economics, Elsevier, vol. 251(C).
    5. Du, Hang & Wei, Lai & Zhu, Qinghua, 2023. "Competition of consumables’ original brand manufacturers and remanufacturers considering the entry of compatible manufacturers," European Journal of Operational Research, Elsevier, vol. 306(2), pages 679-692.
    6. Shen, Bin & Xu, Xiaoyan & Yuan, Quan, 2020. "Selling secondhand products through an online platform with blockchain," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 142(C).
    7. Akshay Mutha & Saurabh Bansal & V. Daniel R. Guide, 2023. "Case Article—ReCellular Inc: Managing Demand Uncertainty in Closed-Loop Remanufacturing," INFORMS Transactions on Education, INFORMS, vol. 24(1), pages 8-12, September.
    8. Hong Sun & Yan Li, 2023. "Optimal Acquisition and Production Policies for Remanufacturing with Quality Grading," Mathematics, MDPI, vol. 11(7), pages 1-21, March.

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