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Optimal production and pricing strategies for a remanufacturing firm

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  • Liu, Zhuojun
  • Chen, Jing
  • Diallo, Claver

Abstract

The management of remanufactured products has become an important issue for manufacturers due to the associated economic benefits and the increase of sustainability awareness worldwide. Pricing is used as a control mechanism in remanufacturing management to adjust demand for new and remanufactured products and the potential market share cannibalization between these two types of product. This paper proposes a mathematical model to investigate the optimal production and pricing strategies for a monopolistic manufacturer who engages in remanufacturing. The model considers a convex collection and inspection cost, two-quality bins for returns, and the remanufacturing losses. The optimal production and pricing strategies are derived by solving a convex programming model. Our results identify the conditions under which the manufacturer should produce new products, or remanufactured products, or both. Numerical experiments are included to examine the sensitivity of the optimal strategies and gain additional managerial insights.

Suggested Citation

  • Liu, Zhuojun & Chen, Jing & Diallo, Claver, 2018. "Optimal production and pricing strategies for a remanufacturing firm," International Journal of Production Economics, Elsevier, vol. 204(C), pages 290-315.
    • Handle: RePEc:eee:proeco:v:204:y:2018:i:c:p:290-315
    DOI: 10.1016/j.ijpe.2018.07.015
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    1. Liu, Zhuojun & Diallo, Claver & Chen, Jing & Zhang, Michael, 2020. "Optimal pricing and production strategies for new and remanufactured products under a non-renewing free replacement warranty," International Journal of Production Economics, Elsevier, vol. 226(C).
    2. Juan Tang & An‐Lin Song & Chang‐Yi Liu & Zhi Liu, 2023. "Optimal decisions in a remanufacturing supply chain under money‐back guarantees," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(4), pages 2254-2277, June.
    3. Haitao Chen & Zhaohui Dong & Gendao Li & Hetian Zhao, 2020. "Joint Advertisement and Trade-In Marketing Strategy in Closed-Loop Supply Chain," Sustainability, MDPI, vol. 12(6), pages 1-17, March.
    4. Zheng, Xiong & Govindan, Kannan & Deng, Qianzhou & Feng, Lipan, 2019. "Effects of design for the environment on firms’ production and remanufacturing strategies," International Journal of Production Economics, Elsevier, vol. 213(C), pages 217-228.
    5. Zhang, Yunrong & Hong, Zhaofu & Chen, Zhixiang & Glock, Christoph H., 2020. "Tax or subsidy? Design and selection of regulatory policies for remanufacturing," European Journal of Operational Research, Elsevier, vol. 287(3), pages 885-900.
    6. Linan Zhou & Gengui Zhou & Hangying Li & Jian Cao, 2023. "Channel Selection of Closed-Loop Supply Chain for Scrapped Agricultural Machines Remanufacturing," Sustainability, MDPI, vol. 15(6), pages 1-30, March.
    7. Abdurrahman Mawlood Mustafa & Asil Azimli & Rizgar Abdullah Sabir Jaf, 2022. "The Role of Resource Consumption Accounting in Achieving Competitive Prices and Sustainable Profitability," Energies, MDPI, vol. 15(11), pages 1-23, June.
    8. Liu, Zhuojun & Chen, Jing & Diallo, Claver & Venkatadri, Uday, 2021. "Pricing and production decisions in a dual-channel closed-loop supply chain with (re)manufacturing," International Journal of Production Economics, Elsevier, vol. 232(C).
    9. Wen, Danping & Xiao, Tiaojun & Dastani, Mehdi, 2021. "Channel choice for an independent remanufacturer considering environmentally responsible consumers," International Journal of Production Economics, Elsevier, vol. 232(C).
    10. Lijun Meng & Qiang Qiang & Zuqing Huang & Baoyou Zhang & Yuxiang Yang, 2020. "Optimal Pricing Strategy and Government Consumption Subsidy Policy in Closed-Loop Supply Chain with Third-Party Remanufacturer," Sustainability, MDPI, vol. 12(6), pages 1-29, March.
    11. Yan Zhang & Wen Zhang, 2023. "Optimal pricing and greening decisions in a supply chain when considering market segmentation," Annals of Operations Research, Springer, vol. 324(1), pages 93-130, May.
    12. Jian Cao & Xihui Chen & Sisi Wu & Sanjay Kumar, 2021. "Evolving remanufacturing strategies in China: an evolutionary game theory perspective," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 23(10), pages 14827-14853, October.
    13. You Qiu & Youliang Jin, 2022. "Impact of environmental taxes on remanufacturing decisions of a duopoly," Economic Change and Restructuring, Springer, vol. 55(4), pages 2479-2498, November.
    14. Jiali Wang & Yujia Huo & Xiangyu Guo & Yang Xu, 2022. "The Pricing Strategy of the Agricultural Product Supply Chain with Farmer Cooperatives as the Core Enterprise," Agriculture, MDPI, vol. 12(5), pages 1-17, May.

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