Price and service competition between new and remanufactured products in a two-echelon supply chain

In this paper, we consider a supply chain consisting of two manufacturers and a retailer. The first manufacturer is a traditional manufacturer that produces the new product, while the second manufacturer operates a reverse channel producing remanufactured products from used cores. Both manufacturers bundle their products with services, including warranty and advertisement, and they sell through the same retailer, which independently determines the sales prices. We assume that the second manufacturer invests extra effort in facilitating the remanufacturing process. In this study, we identify the equilibrium characteristics with respect to the remanufacturer's effort and price and service decisions for all members of the supply chain. We also investigate the profits of chain members by considering different interactions between prices and service. Based on the theoretical and numerical analyses, we derive economic and managerial insights for chain members. (C) 2012 Elsevier B.V. All rights reserved.