Abstract:
Remanufactured product has attracted the attention of both academics and practice. A common view in the previous research is that consumers’ willingness to pay for a remanufactured product is a fixed fraction of their willingness to pay for the new version. When consumers lack information about the remanufactured version, price is one of important indicators of quality, thus consumers will judge the quality from its price. This paper considers pricing strategy of a firm that offers both new and remanufactured products when the price of remanufactured product is taken as an indicator of quality. We think that consumers’ WTP for a remanufactured product is a function of the relative price—the price ratio of remanufactured to the new, not an exogenous parameter as the previous research assume. We obtain some observations from numerical simulations. And we compare the main results of analytical solutions with the case when the price devaluation is ignored.
Key words: pricing, remanufactured product, price-perceived quality
Guanghua School of Management, Peking University, Beijing, 100871
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