The prices and quality of new and remanufactured products in a new market segment

Abstract

This paper studies the optimal prices and quality of new and remanufactured products, and especially discusses the quality adjustment of the original equipment manufacturer (OEM) in a new market segment that consists of the indifferent segment and the new product only segment. Consumers in the first segment have the same willingness to pay for new and remanufactured products, while consumers in the second segment are only willing to purchase new products. We use the proportion of consumers in the indifferent segment accounting for all consumers to segment the market. We present game models and employ backward induction to derive the optimal prices and quality in three scenarios: the monopolist OEM no‐remanufacturing, the monopolist OEM remanufacturing, and an OEM no‐remanufacturing but an independent remanufacturer (IR) remanufacturing. When the OEM or the IR remanufactures, we find that the OEM cannot lower the product quality. In addition, we compare the optimal quality between the unsegmented and segmented market for each scenario. The results show the OEM should increase its product quality under certain conditions after the OEM realizes that there is a segmented market. Furthermore, we conduct numerical analyses to discuss the impact of related parameters on practitioners’ profits, which provides more guidelines for practitioners.

Does Environmental Education Always Contribute to Remanufacturing Supply Chain Development?

“…Baghdadi et al [ 21 ] explored a tradeoff between customers’ expected costs and dealers’ expected profit when a two-dimensional warranty and post-warranty service are provided with remanufactured products. Qiao and Su [ 22 ] studied the optimal prices and quality of new and remanufactured products by segmenting the market as the indifferent segment and the new product-only segment. Nevertheless, a significant difference between their work and ours is that our study focuses on environmental education in the remanufacturing supply chain with yield uncertainty, and examines how environmental education affects the decision on remanufacturing production channels.…”

Complex effects of cooperative behavior on authorized remanufacturing supply chain decisions under subsidies

“…Agrawal et al [ 22 ] studied from the perspective of consumers’ perception of new products and believed that third-party remanufacturing might improve consumers’ perception of new products and thus increase the profit of the original manufacturer. To reduce the effect of remanufactured products on the original manufacturer’s profit, the original manufacturer can adopt methods, such as market segmentation [ 14 , 23 ], product quality improvement [ 24 , 25 ], and price discrimination [ 26 , 27 ]. The above research provides the theoretical basis for the efficient operation of remanufacturing closed-loop supply chain from three perspectives: the pricing of remanufacturing and new products, the influence of remanufacturing on the profit of the new product supply chain and the influence of remanufacturing production mode on the original supply chain.…”

Toward supply side incentive: The impact of government schemes on a vehicle manufacturer's adoption of electric vehicles

“…(2020) obtain an EV manufacturer's product choice strategy about two EVs with high and low driving ranges under the subsidy scheme by capturing consumers’ range anxiety. Qiao and Sun (2021) examine an original equipment manufacturer's quality adjustment in the new market segment composed of the indifferent segment and the new product only segment. Our construction method of the consumer utility is similar to Luo et al.…”