Managing New And Remanufactured Product With Network Effect

With the development of information and manufacturing technology,electronic product replacement is getting faster and faster,resulting in a large number of aban-doned electronic products.In order to solve the environmental pollution and waste of resources caused by used electronic products,and to gain more profit,many electronic product manufacturers begin to promote recycling and remanufacturing projects.Man-ufacturers collect used electronics,remanufacture them with specific technology,and then deliver remanufacted products back to the market.In this process,the waste of resources and production costs are both reduced.Meanwhile,network effects can af-fect the utility of electronic products.Due to network effects,the utility of electronics increases as the number of users increases.On the one hand,network effects influence the demand of electronic products,which has an impact on the producing and remanu-facturing decisions of manufacturers;on the other hand,manufacturer's price decision determines the sales volume of the products,affecting the number of users in the market and the strength of the network effect.In order to study the quantity and price decision of remanufacturable electronic products under the influence of network effects,and to analyze the strategy of manu-facturers to take advantage from network effect,this paper builds a model to describe the process of an electronic product manufacturer producing and selling both new and remanufactured products in two and multiple periods.The number of users in the mar-ket is changing during the sales and recycling process,and the utility increment brought by the network effect is also changing.Considering the impact of network effects,the manufacturer makes the quantity and price of new and remanufactured products deci-sion in each period.Using constrained nonlinear programming model,dynamic programming model and numerical analysis,the optimal strategies for two periods,multiple periods and in-finite periods are given respectively.Studies have shown that for two period sales,there is a threshold affected by the strength of the network effect,which determines whether the company will manufacture new products while remanufacturing old products in the second period.For multiple period sales,the results of numerical analysis show that sales periods can be divided into three stages according to price and production decision.In the three stages,the number of users accumulated in the market is first increasing,then unchanged,and finally reducing.In infinite-period sales,the market will reach a stable state and since then the firm's production and price decision,the number of users in the market will both remain unchanged.This paper also provide some management insights for manufacturers.For exam-ple,manufacturer should lower the price to attract customers,accumulate users,and then increase the price and use network effects to gain profit;the network effect of products can increase the revenue of remanufacturing,driving manufacturers to develop reman-ufacturing technologies and reduce remanufacturing cost.