Optimal Pricing Strategies for Trade-In Programs: A Comparative Theoretical Analysis of No-Price-Commitment and Price-Commitment Models for Remanufacturing
In the context of increasing environmental awareness and resource scarcity, trade-in and remanufacturing have emerged as important strategies for sustainable product management. This study constructs decision-making models for a monopolistic manufacturer operating in a two-period market. The manufac...
Saved in:
| Main Authors: | , , , |
|---|---|
| Format: | Article |
| Language: | English |
| Published: |
MDPI AG
2025-06-01
|
| Series: | Systems |
| Subjects: | |
| Online Access: | https://www.mdpi.com/2079-8954/13/6/472 |
| Tags: |
Add Tag
No Tags, Be the first to tag this record!
|
| Summary: | In the context of increasing environmental awareness and resource scarcity, trade-in and remanufacturing have emerged as important strategies for sustainable product management. This study constructs decision-making models for a monopolistic manufacturer operating in a two-period market. The manufacturer produces new products in Period 1, recycles used products via trade-in for remanufacturing, and sells both new and remanufactured products in Period 2. Depending on whether the remanufactured product price is pre-committed, two models (no price commitment and price commitment) are established. The model optimization reveals that, regardless of the price commitment, four recycling and remanufacturing strategies emerge when the manufacturer engages in remanufacturing. The choice of strategy is jointly influenced by the unit residual value of the used product (<inline-formula><math xmlns="http://www.w3.org/1998/Math/MathML" display="inline"><semantics><mi>s</mi></semantics></math></inline-formula>) and the unit cost of the remanufactured one (<inline-formula><math xmlns="http://www.w3.org/1998/Math/MathML" display="inline"><semantics><mrow><msub><mi>c</mi><mi>r</mi></msub></mrow></semantics></math></inline-formula>). The theoretical findings for a special case (<inline-formula><math xmlns="http://www.w3.org/1998/Math/MathML" display="inline"><semantics><mrow><msub><mi>c</mi><mi>r</mi></msub><mo>=</mo><mi>s</mi><mo>=</mo><mn>0</mn></mrow></semantics></math></inline-formula>) demonstrate that pre-committing the price of remanufactured products compels the manufacturer to simultaneously lower the price of new products and reduce trade-in subsidy while elevating the remanufactured product price. This pricing realignment reduces combined sales volumes across both periods, ultimately diminishing the total profit over two periods. Moreover, price commitment does not boost the remanufacturing rate. This study provides theoretical guidance and managerial insights for manufacturers in terms of pricing strategies and the reuse of used products. |
|---|---|
| ISSN: | 2079-8954 |