Impact of reference price effect on pricing decisions in two-period manufacturing/remanufacturing system

Evolving around two remanufacturing modes in a two-period manufacturing/remanufacturing system with Original Equipment Manufacturer (OEM) remanufacturing and Third-Party Remanufacturer (TPR) remanufacturing, based on the consumers' Reference Price Effect (RPE) for new products,the optimization theory and game theory were utilized to investigate the optimal (equilibrium) pricing decisions and members' profits,and the influences of RPE and consumers' preference for remanufactured products were analyzed by mathematical derivation and numerical simulation. The conclusions showed that there might be two scenarios： the quantity of remanufactured products in the second period was subject to or not subject to the sales restriction in the first period under both modes owing to the different parameter settings. No matter which values the parameters were, when the RPE was enhanced, OEM and TPR would gain and had a loss in TPR mode respectively. The OEM would always benefit (suffer a loss) from the increase of consumers' preference in OEM (TPR) remanufacturing mode. Under OEM remanufacturing mode, if the cost of new product and consumer preference were given,OEM could always benefit from the enhancement of RPE when the remanufacturing quantity in the second period was not restricted by the new products in the first period or only constrained within the partial range of the reference price factor; when the remanufacturing quantity was wholly restricted,the profit of OEM would decrease first and then increase with the enhancement of the reference price effect. Under TPR remanufacturing mode,when the remanufacturing quantity was not constrained, if the reference price factor was lower than a certain threshold, TPR could benefit from higher consumer preference; on the contrary,the profit of TPR would increase first and then decrease in consumer preference. When the remanufacturing quantity was constrained, in most cases the profit of TPR would increase in consumer preference. However, when the cost of new product was in the medium level and OEM could make the most of the reference price effect, the increase in consumer preference would harm the benefit of TPR, which was significantly different from the conclusions without RPE. © 2022 CIMS. All rights reserved.