Upgrading Strategy, Warranty Policy and Pricing Decisions for Remanufactured Products Sold with Two-Dimensional Warranty

Esmat Baghdadi, Mahmood Shafiee and Babakalli Alkali
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Esmat Baghdadi: Department of Industrial Engineering, Iran University of Science and Technology, Tehran 16846-13114, Iran
Mahmood Shafiee: Mechanical Engineering Group, School of Engineering, University of Kent, Canterbury CT2 7NT, UK
Babakalli Alkali: School of Computing, Engineering and Built Environment, Glasgow Caledonian University, Glasgow G4 0BA, UK

Sustainability, 2022, vol. 14, issue 12, 1-15

Abstract: The environmental sustainability and business benefits of end-of-life products have led to worldwide growth in the remanufacturing market. However, customers are often sceptical about the quality and durability of remanufactured products. To ensure a risk-free customer experience, dealers carry out some upgrading actions on the most critical components and offer a reasonable warranty period on products at the time of resale. It is crucial for dealers to consider customers’ attitudes and preferences when deciding on an upgrading strategy, warranty coverage, and sales price for remanufactured products. This paper aims to establish an equilibrium between customers’ expected costs and dealers’ expected profit for remanufactured products sold with a two-dimensional warranty and post-warranty service. In our model, customers make their decisions based on cost–benefit balance, whereas dealers make decisions that maximise their profit margin. Owing to the nature of the conflict between the dealer and customers, a Stackelberg game model is developed to optimise the upgrade strategy, warranty policy, and pricing decisions for remanufactured products. The Karush–Kuhn–Tucker (KKT) optimality condition of the lower-level problem is used to solve the model. Finally, a numerical example is provided to illustrate its applicability.

Keywords: remanufacturing; end-of-life products; upgrading; two-dimensional warranty; Stackelberg game theory; post-warranty (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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