Revenue management in remanufacturing under competition, cannibalization, and customer behavior

Although remanufacturing has good economic potential, many firms are worried about the effects of cannibalization and competition. Cannibalization leads to issues in the optimal pricing decision since it affects the new product market. At the same time, the presence ofanother firm selling the same primary product as well as its remanufactured version is also an issue for firms, since the firms face externalcompetition and also strive to evolve a reasonable remanufacturing strategy where the collection of used product is also a factor. Further,customer behavior towards new and remanufactured products determine the degree of cannibalization and thus affect the optimal prices.Two kinds of customer behavior are observed - an inverted-U-shaped function where customers get suspicious when the price is too low, andthe other is a linear function which behaves according to willingness to pay. In this study, we develop models to help firms make the strategicdecisions concerning remanufacturing policies under cannibalization and different customer behavior in a competitive setting. We considerduopoly environments with two firms in direct competition selling their new and remanufactured products in the same market. We identify theequilibrium decisions and profits for both the firms. We provide sensitivity analyses and derive general managerial insights