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Pricing used products for remanufacturing

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Author Info

  • Liang, Yijiong
  • Pokharel, Shaligram
  • Lim, Geok Hian
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    Abstract

    Remanufacturing is one of recovery options for used products. As remanufacturing requires a continuous supply of used products, the economic incentive is required to attract customers to return their used products (called cores) and the problem of pricing a core becomes an important issue. Such a pricing problem is analogous to pricing an option, which can be used to sell the remanufactured cores (called core products). As sales price of core products follows a geometric Brownian motion, we propose a model here to evaluate the acquisition price of cores. This model links core acquisition price with the sale price of core product but assumes other costs such as logistics and remanufacturing to be deterministic. We have presented a numerical example to show its applicability. Since the model proposed here is generic, it is believed that the proposed model can be used in setting the core prices in many situations.

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    Bibliographic Info

    Article provided by Elsevier in its journal European Journal of Operational Research.

    Volume (Year): 193 (2009)
    Issue (Month): 2 (March)
    Pages: 390-395

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    Handle: RePEc:eee:ejores:v:193:y:2009:i:2:p:390-395

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    Web page: http://www.elsevier.com/locate/eor

    Related research

    Keywords: Remanufacturing Pricing policy Brownian motion Core price Reverse logistics;

    References

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    1. Black, Fischer & Scholes, Myron S, 1973. "The Pricing of Options and Corporate Liabilities," Journal of Political Economy, University of Chicago Press, vol. 81(3), pages 637-54, May-June.
    2. V. Daniel R. Guide, Jr. & Ruud H. Teunter & Luk N. Van Wassenhove, 2003. "Matching Demand and Supply to Maximize Profits from Remanufacturing," Manufacturing & Service Operations Management, INFORMS, vol. 5(4), pages 303-316, October.
    3. Franke, C. & Basdere, B. & Ciupek, M. & Seliger, S., 2006. "Remanufacturing of mobile phones--capacity, program and facility adaptation planning," Omega, Elsevier, vol. 34(6), pages 562-570, December.
    4. Postali, Fernando A.S. & Picchetti, Paulo, 2006. "Geometric Brownian Motion and structural breaks in oil prices: A quantitative analysis," Energy Economics, Elsevier, vol. 28(4), pages 506-522, July.
    5. Robotis, Andreas & Bhattacharya, Shantanu & Van Wassenhove, Luk N., 2005. "The effect of remanufacturing on procurement decisions for resellers in secondary markets," European Journal of Operational Research, Elsevier, vol. 163(3), pages 688-705, June.
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    Citations

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    Cited by:
    1. Teunter, Ruud H. & Flapper, Simme Douwe P., 2011. "Optimal core acquisition and remanufacturing policies under uncertain core quality fractions," European Journal of Operational Research, Elsevier, vol. 210(2), pages 241-248, April.
    2. Erwin M. Schau & Marzia Traverso & Annekatrin Lehmann & Matthias Finkbeiner, 2011. "Life Cycle Costing in Sustainability Assessment—A Case Study of Remanufactured Alternators," Sustainability, MDPI, Open Access Journal, vol. 3(11), pages 2268-2288, November.
    3. Wee, Hui-Ming & Lee, Ming-Chang & Yu, Jonas C.P. & Edward Wang, C., 2011. "Optimal replenishment policy for a deteriorating green product: Life cycle costing analysis," International Journal of Production Economics, Elsevier, vol. 133(2), pages 603-611, October.
    4. Choi, Tsan-Ming & Li, Yongjian & Xu, Lei, 2013. "Channel leadership, performance and coordination in closed loop supply chains," International Journal of Production Economics, Elsevier, vol. 146(1), pages 371-380.
    5. Gernot Lechner & Marc Reimann, 2013. "The effect of active used product acquisition on manufacturing and remanufacturing strategies," Working Paper Series, Social and Economic Sciences 2013-01, Faculty of Social and Economic Sciences, Karl-Franzens-University Graz.
    6. Wu, Cheng-Han, 2012. "Product-design and pricing strategies with remanufacturing," European Journal of Operational Research, Elsevier, vol. 222(2), pages 204-215.
    7. Wu, Cheng-Han, 2012. "Price and service competition between new and remanufactured products in a two-echelon supply chain," International Journal of Production Economics, Elsevier, vol. 140(1), pages 496-507.
    8. Xiong, Yu & Li, Gendao & Zhou, Yu & Fernandes, Kiran & Harrison, Richard & Xiong, Zhongkai, 2014. "Dynamic pricing models for used products in remanufacturing with lost-sales and uncertain quality," International Journal of Production Economics, Elsevier, vol. 147(PC), pages 678-688.
    9. Hazen, Benjamin T. & Overstreet, Robert E. & Jones-Farmer, L. Allison & Field, Hubert S., 2012. "The role of ambiguity tolerance in consumer perception of remanufactured products," International Journal of Production Economics, Elsevier, vol. 135(2), pages 781-790.

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