Paper Info
Title
Upstream or Downstream: Who Should Provide Trade-in Services in Dyadic Supply Chains?*
Abstract
As observed in real-world practices, trade-ins can be offered by either the manufacturer or the retailer. The party offering the trade-in program faces the trade-off between the fixed trade-in cost incurred and the additional revenue generated. By conducting a game-theoretic study, we analytically explore in this article the optimal choice of trade-in provider in a dyadic supply chain with a single manufacturer and a single retailer. We show that the trade-in models can bear a much higher manufacturing cost and induce a higher new product sale than the benchmark case without trade-ins. It is possible that both the manufacturer and retailer prefer to undertake the trade-in program, which would lead to a conflict; or both firms prefer to be a free rider instead of being the trade-in provider, which would fall into a prisoner's dilemma. Moreover, the powerful manufacturer has an incentive to delegate the trade-in service to the retailer when facing a higher fixed trade-in cost, but the delegation option is always worse off for the retailer compared to the scenario in which the retailer provides trade-ins by herself. We also show that the trade-in scenarios always benefit the environment and consumers of the replacement segment, but hurt the primary segment consumers. The social welfare would actually be higher in the scenarios with trade-ins if the fixed trade-in cost is relatively low and the residual value of old products is relatively high.
Year
DOI
Venue
2021
10.1111/deci.12476
DECISION SCIENCES
Keywords
DocType
Volume
Pricing, Rebate, Social Welfare, Supply Chain Management, Trade-ins
Journal
52
Issue
ISSN
Citations 
5
0011-7315
0
PageRank 
References 
Authors
0.34
0
4
Name
Order
Citations
PageRank
Fei Tang100.34
Zu‐Jun Ma200.34
Ying Dai362.61
Tsan-Ming Choi4104075.03