Equilibrium Decisions Of New And Remanufactured Products Under Price And Service Competition

As is well known, lots of companies compete with their rivals in pricing. In recent years, as the economy rapidly develops, the living standards of people have improved a lot.Consequently, more and more customers begin to focus on the service that accompanies products when making a buying decision. Now the problem that more and more products are becoming homogeneous is extremely severe. Due to the slight differences between products, a company has to offer the best service levels to hold the market share in the fierce competition with others. As an important dimension of service level, warranty period plays a great role in the process of selling. Many countries' laws also require that companies must provide warranty period for products. A longer warranty period could show customers the excellent quality of products, which definitely boost customers' buying confidence.This paper mainly concentrates on how to obtain the optimal decisions when both price competition and service competition are taken into account. Because warranty period is different from service levels to some extent, we develop two distinctive supply chain models, and then achieve some useful properties about the equilibrium decisions. Our main results and contributions are as follows:1.We study a supply chain composed of a manufacturer and two competing retailers. The manufacturer sells both new products and remanufactured products to the retailers.Each retailer can only order one kind of product from the manufacturer, and then sell them to the market at a certain sale price. Furthermore, we develop a demand function with respect to products' selling prices and service levels. Finally, the existence of the equilibrium behavior of members in the supply chain are demonstrated and a number of insights concerning some important parameters are discovered.2.Consider a supply chain comprised of a manufacturer, a remanufacturer and a retailer. The manufacturer only produces new products, while the remanufacturer recovers used products from customers, and then upgrades them to a certain level so as to launch them into market again. Both the manufacturer and remanufacturer sell their own products directly to the same retailer and provide warranty period to customers. Then a demand function with respect to products' selling prices and warranty periods is developed. Moreover, we prove the existence of the equilibrium decisions of members in the supply chain. At last, we obtain some useful properties of the equilibrium decisions and provide a set of numerical examples to validate these properties. A lot of managerial insights are presented too.