Table of Contents Author Guidelines Submit a Manuscript
Journal of Applied Mathematics
Volume 2014, Article ID 543092, 10 pages
http://dx.doi.org/10.1155/2014/543092
Research Article

The Strategy of New Product Introduction in Durable Goods with Secondary Market: Application of the Optimization Method to Supply Chain Problem

1School of Economics and Business Administration, Chongqing University, Chongqing 400044, China
2Chongqing Key Laboratory of Logistics, Chongqing University, Chongqing 400044, China

Received 13 November 2013; Accepted 13 January 2014; Published 13 March 2014

Academic Editor: Miroslaw Lachowicz

Copyright © 2014 Pei Zhao and Zhongkai Xiong. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

Abstract

The aim of this paper is to address how the secondary market affects the strategy of the manufacturer’s new product introduction by using the optimization method. To do so, we develop a two-period model in which a monopolistic manufacturer sells its new durable products directly to end consumers in both periods, while an entrant operates a reverse channel selling used products in the secondary market. We assume that the manufacturer launches a higher quality product in the second period for the technological innovation. We find that the secondary market can actually increase the manufacturer’s profitability and drives the new product introduction in the second period. We also derive the effect of the durability and the degree of quality improvement on the pricing of supply chain partners.