Research On Pricing Decisions In A Remanufacturing Supply Chain Under Different Money-back Guarantee Policies

With the emerging of global manufacturing industry,the problems of resource shortage and environmental pollution are becoming more and more prominent.Remanufacturing has proven to be one of the effective ways to alleviate the problems of resource shortage and environmental pollution.However,manufacturers’ fears that remanufacturing business will crowd out the market for new products,consumer stereotypes about the low quality of remanufactured products,and uncertainties about the quality and quantity of returns pose great challenges to the development of remanufacturing industry.In this paper,we incorporate the money-back guarantee(MBG)policy into the remanufacturing supply chain(RSC)system,consider the quality of returns,and formulates an RSC dynamic game model consisting of a manufacturer and a retailer,the main research contents include:First,under the model of providing a full MBG policy for new products,we explore the optimal pricing decisions of the RSC under different remanufacturing cases,and analyze the effects of the production costs of new and remanufactured products,the return rate of non-defective returns,and consumer acceptance of remanufactured products on the optimal decisions and individual profit.Secondly,a partial MBG policy is introduced to explore the impact of the partial MBG policy on the manufacturer’s engagement in different remanufacturing cases and provide sensitivity analysis.Finally,we compare the optimal solutions under two MBG policies,and explore the optimal policy from the perspective of economy and environment respectively.Through quantitative modeling and numerical simulation,the conclusions in this paper are obtained as follows:(1)The higher the production cost of the new product,the higher its wholesale and retail prices,and the price of the remanufactured product will not decrease.The lower the remanufacturing cost,the higher the manufacturer’s willingness to remanufacture,and the lower the retail price of new products,as well as no increase(decrease)in the price of remanufactured products(the manufacturer’s profit).In most remanufacturing cases,the manufacturer and retailer could achieve a winwin situation by controlling remanufacturing costs.In addition,the price of new products increases in the return transfer cost,while decreases in the consumer’s return cost.If only partially non-defective or defective returns are remanufactured,the retail price of remanufactured product is independent of return transfer cost and consumer’s return cost;otherwise,it increases in them.When the consumer’s acceptance level of remanufactured products is extremely low,both members’ profits are unaffected by the return rate of non-defective returns;however,when the consumer’s acceptance level of remanufactured products is higher,the manufacturer would remanufacture all non-defective returns,and even remanufactures the defective returns since remanufacturing becomes more profitable,thus,the higher the return rate of non-defective returns,the higher the manufacturer’s profit.However,when consumer’s acceptance level for remanufactured products is low(high),a high return rate of nondefective returns losses(benefits)the retailer’s profits.(2)When considering a partial MBG policy for non-defective products,as the partial refund coefficient increases,the range of option for remanufacturing decisions increases;consequently,the manufacturer reduces the wholesale price of new products while the retailer raises the retail price of new products,resulting in a lower demand for new products and a loss of both members’ profits.Partial refund coefficient does not change the impact of remanufacturing costs on pricing decisions and demand.However,the higher the partial refund coefficient,its effect on pricing decisions is more consistent with that under the full refund policy.(3)The effect of production costs of new and remanufactured products,the retailer’s return transfer costs,and the residual value of new products on the optimal decision is independent of whether an MBG policy is provided for remanufactured products.When an MBG is provided for remanufactured products,the retail price and demand for both products increase while the wholesale price of new products remains unchanged.When the remanufacturing cost of remanufactured products is above(below)a certain threshold,the manufacturer should(not)provide an MBG for remanufactured products that enables the simultaneous development of economic and environmental benefits in the RSC.Both members’ profits will be detrimental when the consumer satisfaction rate for remanufactured products increases in the lower range;in this case,a higher consumer satisfaction rate for new products can increase the profitability of both members,but poses a higher negative impact on the environment.