Pricing and branding for remanufactured fashion products

Abstract

In recent years, we have witnessed the start-up of many fashion companies which collect, recycle and sell remanufactured fashion products. This paper explores this particular business operation with respect to their optimal pricing and brand investment decisions. By exploring a stylized basic analytical model, we derive the closed form analytical optimal decisions and explore how they vary with different major model parameters. We uncover that compared to the centralized supply chain optimal decisions, the fashion retailer will over-price the remanufactured fashion product and under-invest on branding under the decentralized setting. A coordination mechanism is hence proposed to help. The situations under which the fashion retailer should set the remanufactured product's price higher than the new product's price are determined. Furthermore, we prove analytically that the presence of a government sponsor for remanufacturing is beneficial to the consumers. Finally, an alternative model with a multiplicative branding effect is investigated. It is interesting to note that the findings obtained under the basic model are still true under the alternative model. Managerial implications and future research are discussed.