Dynamic pricing for remanufacturing within socially environmental incentives

Abstract

We study a dual-product dynamic pricing problem for a remanufacturing system in which a manufacturer makes new and remanufactured products competing for a certain market share. The socially environmental incentives, consisting of consumers' environmentally conscious demand and governments' subsidy on remanufactured products, are considered in this study, which encourage the manufacturer to exert production effort toward environmentally friendly remanufacturing. Three models, namely, two-period, multi-period, and infinite-period scenarios, are formulated to investigate the dynamic pricing problem. Analytical results show that the government's subsidy policies, which provide subsidies to consumers or firms, have equivalent effects for the manufacturer in terms of production and profit. Consumers' environmental consciousness and government subsidy are effective incentives to induce the manufacturer to make more remanufactured products. Some threshold policies are proposed to provide decision supports for manufacturers to formulate pricing and production strategies. By comparing the pricing and production strategies of the three models, we find it interesting that the pricing and production strategies of the multi-period model can be ideally characterised by those of the two-period and infinite-period models. This managerial concept is valuable for manufacturers in formulating pricing and production strategies when the precise production planning horizon is unknown.

Keywords:

• remanufacturing
• green purchase behaviour
• environmental policy
• green supply chain management
• sustainable operations management

Acknowledgments

The authors are grateful for the constructive comments of the anonymous referees.

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1 http://www.mera.org/Communications/Remanufacturing-News/2015/October-2015/October-8-2015/Remanufacturing-Legislation-is-Now-Law.html (accessed on 28 October 2015)

2 http://en.xinfinance.com/html/Industries/Manufacturing/2015/85578.shtml (accessed on 28 April 2015)

3 Only a few studies have considered the multi-period model for a short planning horizon. For example, Ferrer and Swaminathan (2010) extended their two-period model to a five-period case.

4 https://www.epa.gov/environmental-economics/economic-incentives

5 http://www.freepatentsonline.com/5721962.html

6 http://www.zerowastescotland.org.uk/RemanufacturingReport

7 Note that the optimal Lagrangian multipliers ${\mu }_{t-1}^{\ast }$'s can be obtained for any given T.

Additional information

Funding

This study was supported by the grants from the National Natural Science Foundation of China (nos. 71771108, 71401067, 71520107002 and 71472079),    of China (no.  2018YFB161400), the China Postdoctoral Science Foundation (nos. 2017M610385 and 2018T110629), the Key Project of China Ministry of Education for Philosophy and Social Science (no. 16JZD023), the Fundamental Research Funds for the Central Universities (no. 18LZUJBWZY005), and the Belt and Road Special Project of Lanzhou University (no. 2018ldbryb017).