A study on pricing and recycling strategies for retailers with consideration of selling new and refurbished products

Used products can be recycled for remanufacturing, but refurbished products may still compete with new products in a market since some price-sensitive consumers may be attracted by a low price. Therefore, firms should make price decisions for new and refurbished products with caution. This study investigates a retailer's pricing and recycling strategies for two types of consumers: quality-oriented consumers and price-sensitive consumers. The work examines internal and external competition between new and refurbished products with the consideration of consumer heterogeneity. A Stackelberg game theoretic model will be considered in the study, in which the manufacturer is a leader, who determines the official price and wholesale price first, and the retailer is a follower, who then accordingly develops optimal pricing strategies considering the two recycling policies. The analytical results show that retailers would rather recycle products on their own than outsource recycling if they were more capable of remanufacturing.