Optimization of pricing and ordering decisions under duopoly competition for new and remanufactured products in a circular supply chain

Authors

DOI:

https://doi.org/10.15587/1729-4061.2025.325177

Keywords:

circular economy, duopoly competition, Nash game, pricing strategy, remanufacturing, supply chain design

Abstract

This study explores pricing and order interval decisions for competing manufacturers in a circular supply chain. With a growing focus on environmental sustainability in a business, two duopolistically competing manufacturers offer different products to their customers, involving both new and remanufactured products. This research investigates the impact of various products on market demand by considering selling prices and inventories. It highlights how the selling price in the demand function is influenced not only by its price but also by competitors’ prices. Additionally, it emphasizes the pivotal role of the order interval in determining product inventory. This research performs a quantitative method in the operational research. Initially, it structures the demand and profit functions for each manufacturer. By developing a Nash equilibrium model on the game theory, this study determines the optimal decisions for pricing and ordering interval to maximize profit for each manufacturer. The numerical results confirmed that the optimal prices and profits for the manufacturer selling new products (p1=67, π1=1443.96) are higher than the manufacturer (p2=65, π2=1435.22). Meanwhile, the comprehensive sensitivity analysis demonstrates that increasing the selling price (pi=45~85) and order interval (Ti=5.2~6) will reduce the manufacturer’s profit. On the other hand, increasing the competitors’ selling price and order interval will strategically increase the manufacturer’s profit. Furthermore, increasing the wholesale price (wi=35~70) and holding cost (hi=0~15) will decrease the order interval, increase the selling price, and ultimately reduce profit. The managerial insights summarize that it is imperative for a manufacturer to determine the optimal selling price and order interval to gain a competitive advantage when making pricing and ordering interval decisions

Author Biographies

Debrina Puspita Andriani, Universitas Brawijaya

Doctor of Industrial Management

Department of Industrial Engineering

Sugiono Sugiono, Universitas Brawijaya

Doctor of Industrial Engineering

Department of Industrial Engineering

L. Tri Wijaya N. Kusuma, Universitas Brawijaya

Doctor of Industrial Management

Department of Industrial Engineering

Riesa Aliya Tuhfah, Universitas Brawijaya

Master Student of Industrial Engineering

Department of Industrial Engineering

Muhammad Rizki Ardiansah, Universitas Brawijaya

Undergraduate Student of Industrial Engineering

Department of Industrial Engineering

References

  1. Sakthivelmurugan, E., Senthilkumar, G., Karthick, K. N. (2022). Analysis of the impact of circular economy over linear economy in the paper processing industry. Materials Today: Proceedings, 66, 1446–1452. https://doi.org/10.1016/j.matpr.2022.05.449
  2. Neves, S. A., Marques, A. C. (2022). Drivers and barriers in the transition from a linear economy to a circular economy. Journal of Cleaner Production, 341, 130865. https://doi.org/10.1016/j.jclepro.2022.130865
  3. Cesur, E., Cesur, M. R., Kayikci, Y., Mangla, S. K. (2022). Optimal number of remanufacturing in a circular economy platform. International Journal of Logistics Research and Applications, 25 (4-5), 454–470. https://doi.org/10.1080/13675567.2020.1825656
  4. Hazen, B. T., Mollenkopf, D. A., Wang, Y. (2017). Remanufacturing for the Circular Economy: An Examination of Consumer Switching Behavior. Business Strategy and the Environment, 26 (4), 451–464. https://doi.org/10.1002/bse.1929
  5. Sitcharangsie, S., Ijomah, W., Wong, T. C. (2019). Decision makings in key remanufacturing activities to optimise remanufacturing outcomes: A review. Journal of Cleaner Production, 232, 1465–1481. https://doi.org/10.1016/j.jclepro.2019.05.204
  6. Yang, S. S., Ngiam, H. Y., Ong, S. K., Nee, A. Y. C. (2015). The Impact of Automotive Product Remanufacturing on Environmental Performance. Procedia CIRP, 29, 774–779. https://doi.org/10.1016/j.procir.2015.01.017
  7. Baldassarre, B., Maury, T., Mathieux, F., Garbarino, E., Antonopoulos, I., Sala, S. (2022). Drivers and Barriers to the Circular Economy Transition: The Case of Recycled Plastics in the Automotive Sector in the European Union. Procedia CIRP, 105, 37–42. https://doi.org/10.1016/j.procir.2022.02.007
  8. Kurudzhy, Y., Mayorova, I., Moskvichenko, I. (2022). Building a model of supply chains duopoly taking into account the marketing and innovative activities of manufacturing enterprises. Eastern-European Journal of Enterprise Technologies, 2 (3 (116)), 15–21. https://doi.org/10.15587/1729-4061.2022.253821
  9. Andriani, D. P., Tseng, F.-S. (2023). Coordinating a dual-channel supply chain with pricing and extended warranty strategies under demand substitution effects. Eastern-European Journal of Enterprise Technologies, 3 (3 (123)), 45–56. https://doi.org/10.15587/1729-4061.2023.277293
  10. Bobba, S., Tecchio, P., Ardente, F., Mathieux, F., Dos Santos, F. M., Pekar, F. (2020). Analysing the contribution of automotive remanufacturing to the circularity of materials. Procedia CIRP, 90, 67–72. https://doi.org/10.1016/j.procir.2020.02.052
  11. Omair, M., Alkahtani, M., Ayaz, K., Hussain, G., Buhl, J. (2022). Supply Chain Modelling of the Automobile Multi-Stage Production Considering Circular Economy by Waste Management Using Recycling and Reworking Operations. Sustainability, 14 (22), 15428. https://doi.org/10.3390/su142215428
  12. Agrawal, R., Wankhede, V. A., Kumar, A., Luthra, S. (2021). Analysing the roadblocks of circular economy adoption in the automobile sector: Reducing waste and environmental perspectives. Business Strategy and the Environment, 30 (2), 1051–1066. https://doi.org/10.1002/bse.2669
  13. Prochatzki, G., Mayer, R., Haenel, J., Schmidt, A., Götze, U., Ulber, M. et al. (2023). A critical review of the current state of circular economy in the automotive sector. Journal of Cleaner Production, 425, 138787. https://doi.org/10.1016/j.jclepro.2023.138787
  14. Liu, B., Chen, D., Zhou, W., Nasr, N., Wang, T., Hu, S., Zhu, B. (2018). The effect of remanufacturing and direct reuse on resource productivity of China’s automotive production. Journal of Cleaner Production, 194, 309–317. https://doi.org/10.1016/j.jclepro.2018.05.119
  15. Shao, J., Huang, S., Lemus-Aguilar, I., Ünal, E. (2019). Circular business models generation for automobile remanufacturing industry in China: Barriers and opportunities. Journal of Manufacturing Technology Management, 31(3), 542–571. https://doi.org/10.1108/JMTM-02-2019-0076
  16. Geist, H., Balle, F. (2024). Remanufactured products, components, and their materials: A circularity engineering focused empirical status quo analysis. Sustainable Production and Consumption, 45, 525–537. https://doi.org/10.1016/j.spc.2024.02.003
  17. Liu, H., Ye, L., Sun, J. (2023). Automotive parts remanufacturing models: Consequences for ELV take-back under government regulations. Journal of Cleaner Production, 416, 137760. https://doi.org/10.1016/j.jclepro.2023.137760
  18. Wang, Y., Huscroft, J. R., Hazen, B. T., Zhang, M. (2018). Green information, green certification and consumer perceptions of remanufctured automobile parts. Resources, Conservation and Recycling, 128, 187–196. https://doi.org/10.1016/j.resconrec.2016.07.015
  19. Moosmayer, D. C., Abdulrahman, M. D.-A., Subramanian, N., Bergkvist, L. (2020). Strategic and operational remanufacturing mental models: A study on Chinese automotive consumers buying choice. International Journal of Operations & Production Management, 40 (2), 173–195. https://doi.org/10.1108/IJOPM-12-2018-0684
  20. Wang, Y., Hazen, B. T. (2016). Consumer product knowledge and intention to purchase remanufactured products. International Journal of Production Economics, 181, 460–469. https://doi.org/10.1016/j.ijpe.2015.08.031
  21. Yuliawati, E., Pratikto, P., Sugiono, S., Novareza, O. (2021). Development of cores acquisition model with two switching mechanisms in a retailer-oriented closed-loop supply chain system. Eastern-European Journal of Enterprise Technologies, 2 (3 (110)), 6–15. https://doi.org/10.15587/1729-4061.2021.225147
  22. Chinen, K., Matsumoto, M. (2021). Indonesians’ Perceptions of Auto Parts Remanufactured in China: Implications for Global Remanufacturing Operations. Sustainability, 13 (7), 3968. https://doi.org/10.3390/su13073968
  23. Chakraborty, K. (2021). Key decision-making areas of automotive engine remanufacturing: A case study. International Journal of Logistics Systems and Management, 39 (3), 333. https://doi.org/10.1504/IJLSM.2021.115794
  24. Yu, Y., Zhou, D., Zha, D., Wang, Q. (2021). Joint optimization of charging facility investment and pricing in automobile retail supply chain and coordination. Computers & Industrial Engineering, 156, 107296. https://doi.org/10.1016/j.cie.2021.107296
  25. Andriani, D. P., Tseng, F.-S. (2023). Pricing and investment decisions when facing heterogeneous customers under different supply chain power structures. Alexandria Engineering Journal, 78, 390–405. https://doi.org/10.1016/j.aej.2023.07.057
  26. Chakraborty, K., Mondal, S., Mukherjee, K. (2019). Critical analysis of enablers and barriers in extension of useful life of automotive products through remanufacturing. Journal of Cleaner Production, 227, 1117–1135. https://doi.org/10.1016/j.jclepro.2019.04.265
  27. Gunasekara, H., Gamage, J., Punchihewa, H. (2020). Remanufacture for sustainability: Barriers and solutions to promote automotive remanufacturing. Procedia Manufacturing, 43, 606–613. https://doi.org/10.1016/j.promfg.2020.02.146
Optimization of pricing and ordering decisions under duopoly competition for new and remanufactured products in a circular supply chain

Downloads

Published

2025-04-29

How to Cite

Andriani, D. P., Sugiono, S., Kusuma, L. T. W. N., Tuhfah, R. A., & Ardiansah, M. R. (2025). Optimization of pricing and ordering decisions under duopoly competition for new and remanufactured products in a circular supply chain. Eastern-European Journal of Enterprise Technologies, 2(3 (134), 47–54. https://doi.org/10.15587/1729-4061.2025.325177

Issue

Vol. 2 No. 3 (134) (2025): Control processes

Section

Control processes

License

Copyright (c) 2025 Debrina Puspita Andriani, Sugiono Sugiono, L. Tri Wijaya N. Kusuma, Riesa Aliya Tuhfah, Muhammad Rizki Ardiansah

Creative Commons License

This work is licensed under a Creative Commons Attribution 4.0 International License.

The consolidation and conditions for the transfer of copyright (identification of authorship) is carried out in the License Agreement. In particular, the authors reserve the right to the authorship of their manuscript and transfer the first publication of this work to the journal under the terms of the Creative Commons CC BY license. At the same time, they have the right to conclude on their own additional agreements concerning the non-exclusive distribution of the work in the form in which it was published by this journal, but provided that the link to the first publication of the article in this journal is preserved.

A license agreement is a document in which the author warrants that he/she owns all copyright for the work (manuscript, article, etc.).
The authors, signing the License Agreement with TECHNOLOGY CENTER PC, have all rights to the further use of their work, provided that they link to our edition in which the work was published.
According to the terms of the License Agreement, the Publisher TECHNOLOGY CENTER PC does not take away your copyrights and receives permission from the authors to use and dissemination of the publication through the world's scientific resources (own electronic resources, scientometric databases, repositories, libraries, etc.).
In the absence of a signed License Agreement or in the absence of this agreement of identifiers allowing to identify the identity of the author, the editors have no right to work with the manuscript.
It is important to remember that there is another type of agreement between authors and publishers – when copyright is transferred from the authors to the publisher. In this case, the authors lose ownership of their work and may not use it in any way.