Extended consumer responsibility: Syncretic value-oriented pricing strategies for trade-in-for-upgrade programs

Abstract

Nowadays, consumers play a central role in shaping the right retailing strategy. Motivated by the popularity of trade-in-for-upgrade (TIFU) programs in consumer electronics industries, this study adopts a multi-methodological approach to comprehensively explore TIFU-related behavioral pricing and market competition challenges. Grounded upon consumer psychology and behavior theories, this study develops a generalized consumer choice behavior model which takes into account the potential effect of reference dependence choice behavior. A behavior-grounded analytical model is established. Both analytical and quantitative empirical analyses using multiple empirical data sources are conducted. One distinctive feature of the proposed model is the conceptualization of vendor-buyer collaborative value orientation (termed as syncretic value orientation in this paper) in business objective functions, where we advocate that the extended consumer responsibility (ECR) should be incorporated into the modeling and analysis. In particular, this study derives a generalized form of the analytical model to determine the syncretic value-oriented prices and trade-in rebates under TIFU market competition. The results further reveal that involving the syncretic value in business objectives favors not only a price-leading firm’s expansion of market share but also gaining additional profits with a low-price-low-rebate strategy. Utilizing a low-price-high-rebate strategy, a price follower can seize the opportunity to lead in market share when the price leader solely sets profit maximization as its goal in a competitive market.