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Pricing decision model for new and remanufactured short-life cycle products with time-dependent demand

Author

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  • Gan, Shu San
  • Pujawan, I. Nyoman
  • Suparno,
  • Widodo, Basuki

Abstract

In this study we develop a model that optimizes the price for new and remanufactured short life-cycle products where demands are time-dependent and price sensitive. While there has been very few published works that attempt to model remanufacturing decisions for products with short life cycle, we believe that there are many situations where remanufacturing short life cycle products is rewarding economically as well as environmentally. The system that we model consists of a retailer, a manufacturer, and a collector of used product from the end customers. Two different scenarios are evaluated for the system. The first is the independent situation where each party attempts to maximize his/her own total profit and the second is the joint profit model where we optimize the combined total profit for all three members of the supply chain. Manufacturer acts as the Stackelberg leader in the independently optimized scenario, while in the other the intermediate prices are determined by coordinated pricing policy. The results suggest that (i) reducing the price of new products during the decline phase does not give better profit for the whole system, (ii) the total profit obtained from optimizing each player is lower than the total profit of the integrated model, and (iii) speed of change in demand influences the robustness of the prices as well as the total profit gained.

Suggested Citation

  • Gan, Shu San & Pujawan, I. Nyoman & Suparno, & Widodo, Basuki, 2015. "Pricing decision model for new and remanufactured short-life cycle products with time-dependent demand," Operations Research Perspectives, Elsevier, vol. 2(C), pages 1-12.
  • Handle: RePEc:eee:oprepe:v:2:y:2015:i:c:p:1-12
    DOI: 10.1016/j.orp.2014.11.001
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    References listed on IDEAS

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    1. repec:eee:proeco:v:190:y:2017:i:c:p:120-132 is not listed on IDEAS
    2. Ze-Bin Wang & Yao-Yu Wang & Jian-Cai Wang, 2016. "Optimal distribution channel strategy for new and remanufactured products," Electronic Commerce Research, Springer, vol. 16(2), pages 269-295, June.
    3. Waissi, Gary R. & Demir, Mustafa & Humble, Jane E. & Lev, Benjamin, 2015. "Automation of strategy using IDEF0 — A proof of concept," Operations Research Perspectives, Elsevier, vol. 2(C), pages 106-113.
    4. Maiti, T. & Giri, B.C., 2017. "Two-way product recovery in a closed-loop supply chain with variable markup under price and quality dependent demand," International Journal of Production Economics, Elsevier, vol. 183(PA), pages 259-272.

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