Pricing and remanufacturing decisions with speculators and strategic consumers

We investigate pricing and remanufacturing decisions with speculators and strategic consumers for a single type of a product over a two-period sales horizon. A monopolist manufacturer produces a fixed quantity in the first period. Some of the sold products are returned at the end of the first period, which are collected by the manufacturer and/or speculators. Returned products are remanufactured, and then sold in the second period, along with any new products remaining from the first period. Mathematical models take into account the behavioral patterns of different types of customers to maximize the manufacturer's expected total profit. Solution to the mathematical models show that one particular customer behavior is optimal. Specifically, the manufacturer should use a fixed-pricing policy for all products –new and remanufactured alike– and set the price at the maximum level that strategic customers are willing to buy. This will force customers to wait for the second period to buy any products, and hence, will yield the maximum profit for the manufacturer. Additionally, the manufacturer is better off remanufacturing. The sensitivity analysis has shown that the profit is most sensitive to the number of strategic customers.