Optimal core pricing and financing strategies for remanufacturers

This paper studies a problem of how to determining the optimal core prices, financing period and financing amount in the payback period or production period in a remanufacturing system under independently uncertain demand and capital constraints, where the remanufacturer acquires and produces high- and low-quality cores to meet the same market demand, in a single period setting. The acquisition pricing is formulated by a nonlinear programming model, and we obtain the optimal policies based on the KKT (the Karush-Kuhn-Tucker) conditions. Finally, we conduct numerical experiments to show that although financing in the payback period can largely alleviate the problem of capital scarcity, the remanufacturer must pay more financing interest. Based on the comparison and analysis, we derive economic and managerial insights for core acquisition.