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Two-sided competition with vertical differentiation in both acquisition and sales in remanufacturing

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  • Kleber, Rainer
  • Reimann, Marc
  • Souza, Gilvan C.
  • Zhang, Weihua

Abstract

We study the competition between two remanufacturers in the acquisition of used products and the sales of remanufactured products. One firm has a market advantage; we consider two separate cases where either firm could have an acquisition advantage. The problem is formulated as a simultaneous game on a market that is vertically differentiated in both acquisition and sales, where both firms decide on their respective acquisition prices for used products, and selling prices for remanufactured products. A key finding is that a market advantage is significantly more powerful than an acquisition advantage. The firm with a market advantage can preempt the entry of the other firm, even if that firm has a significant acquisition advantage, but not the other way around. This is accomplished through an aggressive acquisition strategy, where the firm with a market advantage sets significantly higher acquisition prices.

Suggested Citation

  • 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.
    • Handle: RePEc:eee:ejores:v:284:y:2020:i:2:p:572-587
    DOI: 10.1016/j.ejor.2020.01.012
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