A STUDY OF PRICING AND UPGRADING POLICIES FOR MULTI-GENERATIONS PRODUCTS WITH A TRADE-IN PROGRAM

摘要

This research explores the pricing strategies of two generations for durable products in a simple supply chain. In recent years, most of companies have often launched new generation products by upgrading the design of their original ones in the market. The upgrading level of quality is an attractive factor to purchase/replace the new/original-generation ones. Meanwhile, the price of the original generations is reduced for sale. Furthermore, companies offer a trade-in rebate to promote sales of the new-generation products and customer loyalties; that is, customers can sell their used products as part payment for buying new generation products. When products are durable goods, the used will compete with the new ones, so that all of the new, original and used products coexist in the market. Therefore, we take into account the heterogeneous customers and the trade-in service to build the profit models of the supplier and retailer. The Stackelberg game is also used to assess the optimal pricing policies to maximize their profits. Furthermore, a numerical example and some sensitivity analyses are carried out to study the effects of the model parameters on the optimal decisions.