Venue / Hotel
We analyze product-reusability (executed through refurbishing), in the presence of supply disruptions. In this setting, consumers could trade-in their used units and receive new ones, and firms can attract consumers to do so through a trade-in fee. We develop a discrete-time Markov-chain model to determine the degree of product-reusability, price-premium on refurbished units, and trade-in fee. We find that increasing product’s reusability through better product-design is beneficial as the likelihood of supply disruption increases to a certain extent. However, increasing reusability further, when the disruption probability is high, hurts a firm’s profit due to increased design costs and decreased revenues.