Pricing decisions of the “Internet +” recycling platform considering consumer behaviour

Abstract

Online recycling platforms that allow consumers to recycle their obsolete products through the internet have flourished in recent years. Recycling pricing for obsolete products is usually a difficult task for an online recycling platform because there is always uncertainty in consumers’ valuation of obsolete products in a web-based estimation system. The discrepancy between the final recycling price and the initial estimated price of obsolete products in online recycling could deter consumers from participating in such recycling. Moreover, the situation is even more complicated by the fact that consumers' recycling decisions are strongly influenced by their behaviour. In this paper, by considering the channel preference and price prediction behaviour of consumers in the online recycling process, we propose a game-theoretic analytical model to determine the optimal price of the obsolete products in the “Internet +” recycling platform. The optimal pricing strategy for the “Internet +” recycling platform with and without brick-and-mortar recycling competition is obtained. Through numerical studies, we find that the recycling platform can obtain a higher profit when there are no brick-and-mortar recyclers competing. Then, the loss of the value of returned obsolete products benefits the “Internet +” recycling platform but harms the brick-and-mortar recycler, and this benefit to the recycling platform disappears when consumers engage in price prediction behaviour. Last, when the “Internet +” recycling platform has the leader advantage, adopting the price decision to conclude partial online recycling transactions can alleviate the negative impact of consumer price prediction behaviour on the recycling platform, and the same is true for increasing the proportion of grades-matched obsolete products.