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Market Segmentation and Product Technology Selection for Remanufacturable Products

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  • Laurens G. Debo

    () (Tepper School of Business, Carnegie Mellon University, Pittsburgh, Pennsylvania 15213)

  • L. Beril Toktay

    () (College of Management, Georgia Institute of Technology, Atlanta, Georgia 30308)

  • Luk N. Van Wassenhove

    () (Technology and Operations Management, INSEAD, 77305 Fontainebleau, France)

Abstract

Remanufacturing is a production strategy whose goal is to recover the residual value of used products. Used products can be remanufactured at a lower cost than the initial production cost, but consumers value remanufactured products less than new products. The choice of production technology influences the value that can be recovered from a used product. In this paper, we solve the joint pricing and production technology selection problem faced by a manufacturer that considers introducing a remanufacturable product in a market that consists of heterogeneous consumers. Our analysis discusses the market and technology drivers of product remanufacturability and identifies some phenomena of managerial importance that are typical of a remanufacturing environment.

Suggested Citation

  • Laurens G. Debo & L. Beril Toktay & Luk N. Van Wassenhove, 2005. "Market Segmentation and Product Technology Selection for Remanufacturable Products," Management Science, INFORMS, vol. 51(8), pages 1193-1205, August.
  • Handle: RePEc:inm:ormnsc:v:51:y:2005:i:8:p:1193-1205
    DOI: 10.1287/mnsc.1050.0369
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    File URL: http://dx.doi.org/10.1287/mnsc.1050.0369
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    References listed on IDEAS

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    1. Inderfurth, Karl, 2004. "Optimal policies in hybrid manufacturing/remanufacturing systems with product substitution," International Journal of Production Economics, Elsevier, vol. 90(3), pages 325-343, August.
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    4. Fleischmann, Moritz & Bloemhof-Ruwaard, Jacqueline M. & Dekker, Rommert & van der Laan, Erwin & van Nunen, Jo A. E. E. & Van Wassenhove, Luk N., 1997. "Quantitative models for reverse logistics: A review," European Journal of Operational Research, Elsevier, vol. 103(1), pages 1-17, November.
    5. Mussa, Michael & Rosen, Sherwin, 1978. "Monopoly and product quality," Journal of Economic Theory, Elsevier, vol. 18(2), pages 301-317, August.
    6. Erwin van der Laan & Marc Salomon & Rommert Dekker & Luk Van Wassenhove, 1999. "Inventory Control in Hybrid Systems with Remanufacturing," Management Science, INFORMS, vol. 45(5), pages 733-747, May.
    7. R. Canan Savaskan & Shantanu Bhattacharya & Luk N. Van Wassenhove, 2004. "Closed-Loop Supply Chain Models with Product Remanufacturing," Management Science, INFORMS, vol. 50(2), pages 239-252, February.
    8. Seungjin Whang, 1995. "Market Provision of Custom Software: Learning Effects and Low Balling," Management Science, INFORMS, vol. 41(8), pages 1343-1352, August.
    9. Anirudh Dhebar & Shmuel S. Oren, 1985. "Optimal Dynamic Pricing For Expanding Networks," Marketing Science, INFORMS, vol. 4(4), pages 336-351.
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