Optimal pricing and production decisions in utilizing reusable containers


Atamer B., BAKAL İ. S. , BAYINDIR Z. P.

INTERNATIONAL JOURNAL OF PRODUCTION ECONOMICS, vol.143, no.2, pp.222-232, 2013 (Journal Indexed in SCI) identifier identifier

  • Publication Type: Article / Article
  • Volume: 143 Issue: 2
  • Publication Date: 2013
  • Doi Number: 10.1016/j.ijpe.2011.08.007
  • Title of Journal : INTERNATIONAL JOURNAL OF PRODUCTION ECONOMICS
  • Page Numbers: pp.222-232

Abstract

In this study, we focus on pricing and production decisions in utilizing reusable containers with stochastic customer demand. We consider a manufacturer that sells a single product to the customers in reusable containers with two supply options: (i) brand-new containers and (ii) returned containers from customers. The return quantity depends on both customer demand and the acquisition fee determined by the manufacturer. The unit cost of production using brand-new containers is different than the unit cost of reusing returned containers. The customers are indifferent between brand-new and recovered products. We also consider resource restrictions on the production operations. In this setting, we investigate the optimal pricing and production decisions in order to maximize the manufacturer's profit. We characterize the optimal acquisition fee and the optimal order quantity of brand-new containers analytically and investigate the effect of parameters through an extensive computational study. (C) 2011 Elsevier B.V. All rights reserved.