Pricing strategies of remanufacturing business with replacement purchase

A special feature of remanufacturing business is the existence of large proportion of replacement customers. This is due to the fact that many durable product markets are highly saturated and customers who return their end-of-life products need to do replacement purchase. At the same time, pricing strategies have been widely adopted by remanufacturing companies to balance supply and demand. In this study, the joint decision of acquisition, trade-in, and selling price is considered. The objective is to maximize the expected profit. It is shown that a remanufacturing firm should offer higher rebates to replacement customers when this customer segment has high return quality and high price sensitivity. The optimal pricing policies under uncertain return yield rate are studied. The profitability of different pricing schemes is also investigated.