The manufacturer’s trade-in partner choice and pricing in the presence of collection platforms

Abstract

In recent years, collection platforms based on information technology and e-commerce have developed rapidly and, consequently, a platform-based business model is emerging. This study considers a manufacturer-led supply chain in which the manufacturer offers a trade-in service to the consumer through a downstream retailer. Currently, a collection platform appears in the market and joins the manufacturer’s supply chain. In this case, we investigate who the manufacturer should choose as a partner to offer the trade-in service to the consumer. This study also explores the manufacturer’s optimal pricing strategy and decisions based on uniform and differential pricing strategies. The results show that the manufacturer obtains more profit when the collection platform offers a trade-in program with a differential pricing strategy, and that the retailer earns no profit from reselling a used product. However, the collection platform always obtains profits from the resale of used products through the trade-in service. Moreover, the differential pricing strategy benefits the collection platform but adversely impacts the retailer when the cost of the new product is relatively low. From the government’s perspective, regulators should encourage collection platforms to positively participate in trade-in activities.