Abstract
Remanufacturing has become more prominent as a recovery process to mitigate the massive disposal of short life-cycle product at its end-of-use. However, remanufactured product is often perceived to be inferior to new product, and it has lower value in consumer’s willingness to pay. To increase the perceived quality of the remanufactured product, manufacturer offers a warranty, since one of the three roles possessed in warranty is being a signal to product reliability. This paper studies the pricing decisions and warranty level decision for new and remanufactured products in a closed-loop supply chain consists of a manufacturer and a retailer. The optimization modeling is performed under Stackelberg game with manufacturer as the leader. We found that higher expansion effectiveness coefficient would increase the supply chain profit. Also, there is an interval of demand’s speed of change, where the total profit would be at its highest. The optimum warranty level can be achieved regardless the initial warranty level set at the beginning of retailer’s optimization. Furthermore, the remanufactured product’s wholesale and retail prices are influenced by the expansion effectiveness coefficient.
Highlights
In this modern society, we have witnessed that throw-away behavior has increased significantly
The decision variables are Pn, Pr, Pnw, Prw, w which represent the retail price of new product, retail price of remanufactured product, wholesale price of new product, wholesale price of remanufactured product, and warranty level, respectively
This paper studies the pricing decision and warranty level decision for new and remanufactured products in a closed-loop supply chain
Summary
We have witnessed that throw-away behavior has increased significantly It can take the form of disposable products, style or fashion that is shortly replaced by newer designs, new or added features to a product that are so appealing and have convinced customer to buy new product while the older one is still perfectly functioning. Electronics products are among classes of products that extensively exposed to obsolescence, due to rapid technology advancement as well as customers desires to buy the latest model. These types of obsolescence were introduced by Packard [1] as obsolescence of function and obsolescence of desirability. As for technology based commodities such as mobile phones and computers, Lebreton and Tuma [3] found that those commodities have shorter innovation cycle, which makes the previous generation or model becomes obsolete faster, either functionally and psycho logically
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