Two-sided competition with vertical differentiation in both acquisition and sales in remanufacturing

Rainer Kleber*, Marc Reimann, Gilvan C. Souza, Weihua Zhang

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

12 Citations (Scopus)

Abstract

We study the competition between two remanufacturers in the acquisition of used products and the sales of remanufactured products. One firm has a market advantage; we consider two separate cases where either firm could have an acquisition advantage. The problem is formulated as a simultaneous game on a market that is vertically differentiated in both acquisition and sales, where both firms decide on their respective acquisition prices for used products, and selling prices for remanufactured products. A key finding is that a market advantage is significantly more powerful than an acquisition advantage. The firm with a market advantage can preempt the entry of the other firm, even if that firm has a significant acquisition advantage, but not the other way around. This is accomplished through an aggressive acquisition strategy, where the firm with a market advantage sets significantly higher acquisition prices.

Original languageEnglish
Pages (from-to)572-587
JournalEuropean Journal of Operational Research
Volume284
Issue number2
Early online date15 Jan 2020
DOIs
Publication statusPublished - 16 Jul 2020

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