Optimal acquisition and pricing policies for remanufacturing systems with initial investment

The problem of used product (core) acquisition is an important issue in remanufacturing. In traditional models, remanufacturing systems are assumed to be well-established. However, remanufacturing systems in most developing countries are imperfect and remanufacturers need to make huge initial investments to improve the remanufacturing systems. It is therefore suggested that the effects of initial investment cannot be neglected. In this paper, an acquisition and pricing problem in imperfect remanufacturing systems is studied. The problem is firstly formulated as a two-period nonlinear programming model, and the closed forms of the optimal solution are presented based on Karush-Kuhn-Tucker conditions. Next, the multi-period acquisition and pricing problem, and the effects of the initial investment are discussed. Finally, the conclusions are testified by numerical examples. The results show that with the remanufacturing system improved, the remanufacturer will increase investment and acquire more cores.