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

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