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Pricing decisions for a supply chain with refurbished products

Author

Listed:
  • Yan Zhang
  • Yanyan He
  • Jinfeng Yue
  • Qinglong Gou

Abstract

This paper considers a supply chain consisting of a supplier and a retailer where a fixed portion of new products sold will be returned to the retailer and then be repaired and resold as refurbished products at a lower price. Using the utility model, we formulate how consumers will make their choices when facing both new and refurbished products. Then, using the divide-and-conquer method, we derive the supplier and retailer's equilibrium decisions, including the supplier's wholesale price and the retailer's prices for both the new and refurbished products. The main findings include the following. First, refurbished products will be sold in the market only when the refurbishing cost is small. In this situation, as the refurbishing cost increases, most of the negative impact on the retailer will be transferred to the supplier. Second, in the same condition, as the refurbishing cost increases, the wholesale price and retail price of the new product will change in opposite directions. This result contrasts with the traditional pass-through effect. Third, when the repair cost is moderate, the retailer will eventually not sell refurbished products, but its profit can be significantly improved and the double marginalisation effect can be mitigated.

Suggested Citation

  • Yan Zhang & Yanyan He & Jinfeng Yue & Qinglong Gou, 2019. "Pricing decisions for a supply chain with refurbished products," International Journal of Production Research, Taylor & Francis Journals, vol. 57(9), pages 2867-2900, May.
  • Handle: RePEc:taf:tprsxx:v:57:y:2019:i:9:p:2867-2900
    DOI: 10.1080/00207543.2018.1543968
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    Cited by:

    1. Xin, Baogui & Song, Yaping & Xie, Lei, 2024. "Dynamic pricing and service customization strategy for IoT-based smart products," Technological Forecasting and Social Change, Elsevier, vol. 199(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. Dingzhong Feng & Xinghui Yu & Yongbo Mao & Yangke Ding & Ye Zhang & Zhiyan Pan, 2019. "Pricing Decision for Reverse Logistics System under Cross-Competitive Take-Back Mode Based on Game Theory," Sustainability, MDPI, vol. 11(24), pages 1-20, December.
    4. Alyahya, Mansour & Agag, Gomaa & Aliedan, Meqbel & Abdelmoety, Ziad H., 2023. "Understanding the factors affecting consumers’ behaviour when purchasing refurbished products: A chaordic perspective," Journal of Retailing and Consumer Services, Elsevier, vol. 75(C).
    5. K. Jeganathan & S. Selvakumar & S. Saravanan & N. Anbazhagan & S. Amutha & Woong Cho & Gyanendra Prasad Joshi & Joohan Ryoo, 2022. "Performance of Stochastic Inventory System with a Fresh Item, Returned Item, Refurbished Item, and Multi-Class Customers," Mathematics, MDPI, vol. 10(7), pages 1-37, April.
    6. Li, Xin & Wu, Ming & Shi, Chunming & Chen, Yan, 2023. "Impacts of green credit policies and information asymmetry: From market perspective," Resources Policy, Elsevier, vol. 81(C).
    7. 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.
    8. Zhang, Mengyao & Gou, Qinglong & Yu, Lili & Zhang, Juzhi, 2022. "Pricing decisions for a social comparison product supply chain," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 168(C).
    9. Syed Asif Raza, 2022. "A bibliometric analysis of pricing models in supply chain," Journal of Revenue and Pricing Management, Palgrave Macmillan, vol. 21(2), pages 228-251, April.
    10. Mandal, Anindya & Pal, Brojeswar, 2023. "Investigating dual-channel green supply chain considering refurbishing process and product recycling with environmental awareness effort," Mathematics and Computers in Simulation (MATCOM), Elsevier, vol. 204(C), pages 695-726.
    11. Qiu, Ruozhen & Li, Xuge & Sun, Minghe, 2023. "Vertical integration of an online secondhand platform and a recycling platform under different power structures," European Journal of Operational Research, Elsevier, vol. 310(1), pages 286-301.

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