An optimal pricing policy for reuse items with incentive subsidy demand

In this study, we develop a pricing policy for reuse items that return with receiving an incentive subsidy. The probability of selling is assumed to be a decreasing function of price and availability; thus, not all units are sold. Due to the complexity of the non-linear problem, the Karush-Kuhn-Tucker (KKT) conditions are applied to determine the optimal value of the return subsidy and the selling price. A numerical example and sensitivity analysis on the optimal results are presented to validate the proposed model.