Price and service co-opetiton under uncertain demand and condition of used items in a remanufacturing system

Abstract

This paper studies price and service co-opetition among the two remanufacturing firms considering uncertain demand and condition of the acquired items. Both the firms are competing on price and service to sell their substitutable products through a common retailer, and provide service directly to the end customers. Mathematical models are developed here for four different remanufacturing configurations and derive the equilibrium decision and profit under each of the configurations. Further, identify the situation under which the manufacturers can select direct system and integrated system compared to the global system. One of the key findings is that, when demand variation increases, direct system provides a better result in terms of channel profit compared to other channel configurations. Quantity discount with return contract mechanism is developed to coordinate the decentralized system. The model is demonstrated though a numerical study. An extensive sensitivity analysis is performed to examine the impact of different parameters on the model output to draw managerial insights.