The impact of heterogeneous quality assessments of remanufactured products on the price-demand relationship
R. Kleber, G. Souza, G. Voigt
Current research on strategic issues in Closed-Loop Supply Chain Management typically assumes that consumers are characterized by a heterogeneous willingness to pay (WTP) for a new product which is often modeled by using a uniform distribution. In contrast to this, the value that customers assign to a remanufactured product is determined by discounting the new product price with a common factor. Thus, any heterogeneity in consumers WTP for remanufactured products solely stems from a differing WTP for the new product. However, recent empirical work indicates that consumers are quite different in their assessment of the quality of a remanufactured product. Recent research, for example, shows that consumers relate extremely high discounts on remanufactured products to a low quality of this product and that there is a significant amount of variance in this assessment. Our research aims at identifying the effects of relaxing the assumption that consumers homogenously discount the value of remanufactured goods. Instead, we assume that the discount factor on the new product price is similar to the new product s price distributed over some predefined range. As a preliminary result, we can show that for a uniform distribution of the discount factor, the price-demand curve takes a non-linear form. Our results, thus, indicate that the assumption of linear price-demand curves for remanufactured products is critical if the consumers WTP for remanufactured products is substantially impacted by moderating variables that differ across consumers.
Closed-loop Supply Management, heterogeneous, price-demand
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