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

  • *Corresponding author: Danping Wen

    *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)

Abstract Full Text(HTML) Figure(5) / Table(2) Related Papers Cited by
  • 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:

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  • 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
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    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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