Pricing Decision Model for Short Life-cycle Product in a Closed-loop Supply Chain with Remanufacturing

San, Gan Shu and Pujawan, I Nyoman and Suparno, and Widodo, Basuki (2015) Pricing Decision Model for Short Life-cycle Product in a Closed-loop Supply Chain with Remanufacturing. [UNSPECIFIED]

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Abstract

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. We propose a model for determining prices that maximize the supply chain’s total profit. The system consists of a retailer, a manufacturer, and a collector of used-product under multi-period setting. Demand functions are time-dependent functions, both for new and remanufactured products; and price-sensitive. Return rate is an increasing function of the collecting price. We take pricing game approach, where manufacturer is the leader. The model is solved analytically to find optimal prices as well as analytical insights. The results suggest that the optimal price of remanufactured product is higher during the decline phase compared to the price in previous phases. Numerical examples show that higher remanufacturing cost-savings has reduced collector’s profit.

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