Pricing used products for remanufacturing
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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- 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.
- 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.
- 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.
- 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.
- 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.
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