Differentiated Pricing Decisions Considering Online Consumer Reviews In A Dual-channel Closed-loop Supply Chain Under Different Sales Modes

Nowadays,Online Consumer Review(OCR)is influencing consumer purchasing behavior and firms’ operations decisions significantly.This paper explores the impacts of OCR on the pricing decisions and profitability in a two-stage dual-channel closedloop supply chain under OEM(Original Equipment Manufacturer)remanufacturing mode.Three different sales modes are considered,namely,1)the OEM sells new products in online direct channel in stage 1,and still sells new and remanufactured products in online direct channel in stage 2(i.e.,D-D sales mode);2)the OEM sells new products directly in two stages,and the retailer distributes remanufactured products in stage 2(i.e.,D-DI sales mode);3)the OEM sells new products through both direct and retailer channels in stage 1,while the retailer distributes new products and the OEM sells remanufactured products directly in stage 2(i.e.,DI-ID sales mode).For each sales mode,two-stage differentiated pricing optimization(game)models with and without OCR are established,and the optimal(equilibrium)pricing,the OEM’s profit and the retailer’s profit are derived for two scenarios where the remanufactured volume in period 2 is limited by or not limited by the new product sales in stage 1.Finally,the two scenarios with and without OCR are compared to reveal the conditions under which OEM is motivated to open OCR board and whether the retailer supports the opening of OCR.The main conclusions are as follows:(1)For new products,regardless of under which sales mode and whether the remanufactured volume is limited by the sales of new products in stage 1,the introduction of OCR always makes the OEM(retailer)reduce the wholesale price(selling price)of new products in period 2,and the selling price of new products in period 1 remains unchanged when the remanufactured volume is not limited,and decreases when the remanufactured volume is limited with a sufficiently positive OCR,and increases in other cases.The volume of new products in period 2 in D-DI mode may increase,which depends on the production cost of new product,consumer preference for remanufactured products,and the level of OCR scores.(2)For remanufactured products,in both D-D and DI-ID sales modes,regardless of whether the remanufactured volume is limited or not,the selling price and sales volume of remanufactured products increase only when the OCR conveys sufficiently positive product information,and vice versa.In D-DI sales mode,the price adjustment strategies of the OEM and the retailer also depend on the OCR rating level,i.e.,when the remanufactured volume is not limited,as long as the OCR does not convey the negative information,the retailer will have more opportunities to raise the sales price of remanufactured products than the OEM,and then benefit from OCR.However,when the OCR conveys negative information or remanufactured volume is limited,the OEM will pass on his losses to the retailer by raising the wholesale price by a larger margin(or lowering the wholesale price by a smaller margin)compared to the retail price of remanufactured products,which results in a profit loss for the retailer.(3)Regardless of the sales mode,the OEM has motivation to open OCR boards only if the OCR conveys sufficiently positive information.For the retailer,in the DDI sales mode,even if the OCR conveys negative information,she still supports the opening of OCR boards as long as consumer preference for remanufactured products is high enough.In the DI-ID sales mode,the introduction of OCR is usually unfavorable to the retailer,but if the production cost of new products is low and consumer preference for remanufactured products is high enough,a limited positive OCR score is beneficial to the retailer.This study can provide decision references for the OEM and the retailer to earn the profits from collection and remanufacturing via OCR.