Warranty as an Effective Strategy for Remanufactured Product

Bifeng Liao and Bangyi Li
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Bifeng Liao: College of Economics and Management, Nanjing University of Aeronautics and Astronautics, Nanjing, China & School of Mathematics and Information Science, Yantai University, Yantai, China
Bangyi Li: College of Economics and Management, Nanjing University of Aeronautics and Astronautics, Nanjing, China

International Journal of Information Systems and Supply Chain Management (IJISSCM), 2016, vol. 9, issue 1, 41-57

Abstract: Consumers cannot fully evaluate the product quality before purchase. To reduce consumer risk, some manufacturers offer consumer warranty. Up to now, there are many studies investigating this role, but they seldom consider from the perspective of consumer utility. Consumers view remanufactured products as being of lower quality and are less willing to pay for them. It is important to incorporate the manufacturer's service and consumer heterogeneity in the model. Those employed in the remanufacturing industry are advised to increase the level of warranty associated with their remanufacturing products in order to command higher prices for their products in the marketplace. This paper firstly considers consumer utility, then develops three marketing settings to examine the impact of warranty services, and finally compares the optimal prices and profits among them. The results show that the manufacturer's warranty policy can enhance profit, and the profit is highest when both new and remanufactured products provided differentiated warranty.

Date: 2016
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