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Dynamic pricing of a manufacturer producing new/remanufactured products with consideration of strategic green consumers

• *Corresponding author: Danping Wen

This research was supported by National Natural Science Foundation of China (Nos. 71871112 and 72171108), the K. C. Wong Magna Fund in Ningbo University, and the Program A for Outstanding PhD Candidate of Nanjing University (No. 202001A003)

• Flourishing sales of new and remanufactured products have promp-ted firms to design different pricing strategies for strategic green consumer behavior. To this end, this paper studies a pricing strategy by developing a two-period game model in a remanufacturing system by considering the period and product discounts. Here, the manufacturer has two pricing strategies: dynamic pricing and compensation pricing. Unlike the extant literature on strategic consumers, this paper considers heterogeneous products existing in a remanufacturing system and focuses on how strategic/green consumption behavior affects the pricing strategy. The results through numerical studies indicate that when the consumers' preference for remanufactured products is high, or consumers are short-sighted, the manufacturers prefer a dynamic pricing strategy; in all other cases, a compensation pricing strategy is preferred. Conversely, a manufacturer looking to the long-term benefits favors a compensation pricing scenario. Overall, the green segment is beneficial to the manufacturer, especially when primary consumers show a high preference for remanufactured products.

Mathematics Subject Classification: Primary: 91B42; Secondary: 90B06.

 Citation:

• Figure 1.  Pricing strategies and its decisions in two periods

Figure 2.  The flow diagram of the game sequence in two periods

Figure 3.  The effects of ${{c}_{n}}$, ${{c}_{r}}$, and $\delta$ on the optimal pricing strategy

Figure 4.  The effects of $\delta$, $\theta$, and $\gamma$ on the optimal pricing strategy

Figure 5.  The effects of $\delta$ and $\beta$ on the manufacturer's profit under strategy DP

Table 1.  Comparison of This Study and Related Literature

 Studies Research objective Research method Pricing strategy Consumer behavior Main features [1] Remanufactured products in the CLSC Experimental investigation Not considered Consumer greenness Optimal pricing by using the experimental investigation [5] Used products that can be replaced components in the CLSC Optimization theory Not considered Green segment Existence of a green consumer segment in remanufacturing [6] Fashion products Game theory Dynamic pricing Strategic consumers Effects of demand learning and strategic consumer behavior on pricing [10] Homogeneous product in a market Game theory Two-stage dynamic pricing Strategic consumers Impact of reference price effect and consumer strategic behavior on pricing [18] Petrochemical SC Hybrid Shapley value and Multimoora Not considered Not considered SC performance based on its sustainable strategies [22] Remanufactured products in the CLSC Game theory Not considered Strategic consumers Strategic behavior' effect under three remanufacturing modes [25] Remanufactured products that can be trade-in the CLSC Game theory and optimization theory Dynamic and preannounced pricing strategies Strategic consumers How strategic behavior affect trade-in strategy [26] Sustainable SC Robust stochastic optimization Not considered Not considered SC network design considering renewable energy [27] Risk-aware, resilient and sustainable CLSC Robust optimization Not considered Not considered SC network design with Lagrange relaxation and fix-and-optimize [33] Used products in the CLSC Optimization theory Not considered Not considered Three options for remanufacturing [34] Products undergo cost reductions over life cycles in a market Game theory Dynamic pricing, price commitment, and price matching Strategic consumers Impact of cost reduction under three pricing strategies [36] Perishable product in the market Game theory and optimization theory Dynamic pricing Strategic and myopic consumers Impact of strategic and myopic consumers on optimal inventory and pricing decision [37] Face masks in the sustainable CLSC Optimization algorithm Not considered Not considered Address the production, recycling, and reuse decisions within a multi-period CLSC [42] Dynamic perishable product in a market Game theory and optimization theory Posterior price matching and delay posterior price matching Strategic consumers Two strategies comparison considering strategic consumer behaviour [44] Products in the sharing economy Game theory and optimization theory Price decision Strategic consumers Impact of consumer-to-consumer product trading on in SC operations This paper Remanufactured products in a remanufacturing system Game theory and optimization theory Dynamic pricing and compensation pricing Green segment and strategic consumers Impact of strategic and green consumer behaviors on two pricing strategies

Table 2.  Parameters and Variables Used in This Research

 Symbol Definition Model Parameters $\theta$ Period discount factor for consumers, $0<\theta<1$ $\gamma$ Period discount factor for the manufacturer, $0<\gamma<1$ $v$ Consumer's value for a new product $\delta$ Consumers' Preference (acceptance degree) for Remanufactured Products (PRP), $0<\delta<1$ $c_n, c_r$ Unit production cost of new/remanufactured products $f$ Buyback fee of a used product from consumers $\tau$ Collection rate of used products Decision Variables $p_1$ Price of a first-period product $p_n, p_r$ Price of a second-period new/remanufactured product Functions $U_1$ Consumer's utility for the first-period product $U_n, U_r$ Consumer's utility for the second-period new/remanufactured product $D_1$ Demand for a first-period product $D_n, D_r$ Demand for a second-period new/remanufactured product Alternative Model $\beta$ Proportion of green consumers $U_{nG}, U_{rG}$ Green consumer's utility for the second-period new/remanufactured product
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