Pricing Strategies in the Remanufacturing Market for the Uncertain Market Size in the Second Period

Abstract

Our main endeavor is to investigate the effect of the uncertain market size in the second period on the pricing strategies in the remanufacturing market. Observing the previous research, we find that the market size in the second period is always supposed to be certain. However, there is substantial empirical and experimental evidence that the market size in reality deviates from this assumption. In fact, though the market size in the first period is definitized, it is difficult to confirm the change of the market scale in the second period, since this change is affected by all kinds of elements, such as the awareness of environmental protection, some consumers’ psychological factors, and the related governments’ policies. Hence, we pay attention to the case in which the change rate of the market scale in the second period is random variable. We suppose that this rate satisfies uniform distribution on $[\mathrm{0,2}]$. Underlying this assumption, we further provide an insight into the game-playing relationship between original equipment manufacturers (OEMs) and remanufacturers. Moreover, we delicately and subtly incorporate the game theory, stochastic analysis, adversarial risk analysis (ARA), and optimization methods into the pricing strategies in the remanufacturing market. Last but not least, considerable efforts and attempts have been made to subtly test the sensitivity of an optimal solution to the different parameters.