Pricing and warranty decisions in a two-period closed-loop supply chain

Juan Tang, Bang-Yi Li, Kevin W. Li, Zhi Liu and Jun Huang

International Journal of Production Research, 2020, vol. 58, issue 6, 1688-1704

Abstract: For a two-period closed-loop supply chain (CLSC) consisting of a manufacturer and a retailer, Stackelberg game analyses are conducted to examine pricing and warranty decisions under two warranty models depending on who offers warranty for new and remanufactured products and the corresponding benchmark models with a warranty for new products only. Next, we identify the conditions under which warranty for remanufactured products is offered and investigate how this warranty affects the CLSC operations. Subsequently, comparative studies are carried out to examine equilibrium decisions, profitability and consumer surplus of the CLSC between the two warranty models. Analytical results show that offering warranty for remanufactured products does not affect new product pricing in period 2, but influences the pricing of new products in period 1 and remanufactured products in period 2, thereby enhancing remanufacturing, individual and channel profitability, and consumer surplus. Compared to the retailer warranty for remanufactured products, the manufacturer warranty can attain a more equitable profit distribution. If the warranty cost advantage of the manufacturer (retailer) is significant relative to that of the retailer (the manufacturer), the manufacturer (retailer) arises as a natural choice to offer warranty for remanufactured products as this decision enhances both profitability and consumer surplus.

Date: 2020
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Citations: View citations in EconPapers (16)

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DOI: 10.1080/00207543.2019.1683246

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