Differential pricing under trading in old goods for new based on market segmentation1

This paper considers the differential pricing problem under trading in old goods for new in a two-echelon supply chain with one manufacturer and one retailer. Firstly, we make market segmentation according to the consumer preference of exchanging for the remanufactured product. Considering the subsidy which the government pays for the retailer, we develop three decentralized pricing models, and obtain the corresponding analytical equilibrium solutions. Then, the optimal decision results of three scenarios are compared, and numerical examples are presented to illustrate the effectiveness of the theoretical results. Finally, the changes of optimal prices and optimal expected profits in three game scenarios are obtained by varying the value of parameters, and the corresponding additional managerial insights are gained.