D E T E R M I N I N G T H E O P T I M A L U P G R A D E L E V E L, W A R R A N T Y D U R A T I O N A N D P R O F I T M A R G I N S F O R S E C O N D-H A N D E D P R O D U C T S F R O M T H E V I E W P O I N T S O F C U S T O M E R A N D P R O V I D E R S
Author(s):
Article Type:
Research/Original Article (دارای رتبه معتبر)
Abstract:
This paper provides an optimization model for second-handed products from customers and provider's point of views using game theory. Nowadays, customers with low financial ability usually tend to buy second-handed products. This provides the opportunity for dealers of second-handed products to make profit from selling such products. Since the customer is unaware of the product's performance, the dealer offers warranty or upgrades the product. This, in turn, may increase the price of the product and make the customer reject the offer to buy the product. When the dealer determines the warranty coverage and upgrade level regardless of the customer's expected cost, customer may decide not to buy the product. Therefore, the dealer should consider the cost of the customer in addition to his profit. In an actual environment of buying second-handed products, it can be expected that the customer determines the upgrade level and the length of his warranty period so as to minimize his cost during the product's useful life. Upon this decision of the customer, the provider of the second-handed product determines his margin of profit so as to maximize his expected profit considering demand for the second-handed product. In the present study, we consider the conflict between the customer's expected cost and the provider's expected profit for the second-handed products. The customer decides based on cost-benefit balance and the dealer decides based on maximizing his expected profit. Therefore, Stackelberg decision model for modeling this problem is used. In this model, customer is the leader, and dealer is the follower. We assume that warranty coverage and upgrade level arecustomer's decision variables to be determined so that the customer's expected cost is minimized; warranty, upgrade, post-warranty profit margins are dealer's decision variables to be determined so that the dealer's expected profit is maximized. In this model, the demand for the second-handed product depends on the expected sale price and the expected post warranty price. To solve this problem, the game model is used by the Karush-Kahn-Tucker conditions. Finally, a numerical example and the sensitivity analysis are discussed.
Keywords:
Language:
Persian
Published:
Industrial Engineering & Management Sharif, Volume:33 Issue: 2, 2017
Pages:
99 to 105
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