OPTIMAL DYNAMIC PRICING FOR USED PRODUCTS IN REMANUFACTURING OVER AN INFINITE HORIZON

The return of used products (cores) is the beginning of remanufacturing. Although an appropriate pricing policy can effectively manage the returns, a static pricing policy cannot match the returns and demands because of the high uncertainties in both sides, which in turn results in high inventory cost or lost-sale cost. In this paper, we apply a dynamic pricing policy commonly used in retail setting to the core acquisition management in remanufacturing and study the pricing problem for used products with the objective of minimizing average cost over an infinite horizon. We formulate the pricing problem as a continuous-time Markov decision process and characterize the structural properties of the optimal policy. We also conduct a numerical study to investigate the benefit of dynamic pricing.