Trade-in strategies in closed-loop supply chain when considering manufacturer entrustment behavior and wholesale price contract

Abstract

Many enterprises are implementing trade-in programs through multiple methods, but some lack experience or insufficient conditions to carry out the trade-in program. The previous literature did not consider the impacts of the manufacturer authorizing the third-party information platform (3IP) to implement the trade-in strategy for each member of the closed-loop supply chain. To address this gap, we established three models based on consumer choice behavior: (1) the benchmark model without trade-in strategy; (2) the trade-in model with manufacturer entrustment behavior; (3) the extension model with wholesale price contract. We obtained and compared the equilibrium solutions of the three models. Our results indicate that, compared to the case where there is no entrustment, the manufacturer’s profit is higher if they entrust the 3IP to implement the trade-in program under certain conditions (which is related to the proportion of primary and replacement consumers in the market). Under reasonable circumstances, we find that introducing a wholesale price contract can benefit the manufacturer and increase the profit of the 3IP, stimulate the 3IP to carry out trade-in better, and achieve a win-win situation. Some numerical examples are provided to explain these findings further.