Optimal Pricing and Subsidy Strategy of Manufacturer with New, Upgraded and Remanufactured Products

In the competitive global market, the life cycle of the new product is decreasing due to the companies must to maintain market share, the products improve continuously to attract more consumers, so that the changing over speed is increasing dramatically. When the product demand gradually gentle, companies have chosen to launch a new generation of products to attract the consumers, increase consumer demand for new products and to ensure their own market share and earnings. For another, because of the climate change, environmental protection attracts a lot of attention, many countries establish green regulations and ask companies to take their responsibility. To balance earnings and environmental regulations, companies must to must construct a multi-product pricing, remake and subsidy recovery mechanism. Therefore, the study explore an optimal pricing strategy and subsidy policy with companies involvement in Green Supply Chain (GSC) that takes the multigenerational of new and remake product under subsidy recovery mechanism. For the manufacturer, the goal is to maximize profit. The manufacturer use subsidy tools to study optimal pricing and subsidy policy of company. This research builds multistage demand model under products price and life time to find the optimal pricing and subsidy policy for manufacturer’s reference. In addition the above, we consider the ratio of maximum demand and premium for upgraded and remake product, thus investigating the effect of those factors on the optimal pricing, subsidy policy and total profit of company by numerical analysis. The results show that larger upgraded product market size and manufacturer market power are beneficial to the increase in manufacturer’s profit, so manufacturer could obtain the better outcome of extending the market size; besides, this study finds the sticking point in price discrimination is the premium for upgrade product. In the end, the numerical analysis also shows that the larger market size and optimal premium of upgraded and remake product, which could obtain the better profit of manufacturer. It is expected that this study will help manufacturer implement better strategy and further stimulate the development of GSC.