This research explores the pricing strategies of two generations for durable products in a simple supply chain. In recent years, most of companies often launch new generation by upgrading the design of original products in the market. The upgrading level of quality is an attractive factor to purchase/replace the new-generation ones. Meanwhile, the price of original generations is reduced to sale. Furthermore, companies offer a trade-in rebate to promote 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 products will compete with the new ones, so that all of the new, original and used products coexist in the market. Therefore, we consider the heterogeneous customers and the trade-in severe 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.

Yi-Feng Gao

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Optimal Pricing Strategy for Multi-generations Durable Products with a Trade-in Program