Price and Profitability From Two-Quality Retread Tire
Abstract
Tire manufacturers such as Michelin and Goodyear sell their new and retread tire on their stores. Alternatively, there are independent dealers that also sell the similar retread product via their own channels. In a two-player game theory, increasing one’s profit would result in decreasing the other. This research demonstrates how to find profits by changing price position of retread tire from an OEM and the 3rd party dealer. Profit function bases on price and relative perceived quality to the new product. The simulation results show that mutual profit of both parties is improved by introducing retread tire, however, price competition from individual profit maximization prevents both parties to set the price point that maximize their mutual profits.
Keywords: Market Segmentation, Price Analysis, Remanufactured Products, Retread Tire, Rev erse Supply Chain.
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