Optimal trade-in rebate payment strategies for B2C platforms under different recycling models

Abstract

Online trade-ins are becoming a booming business for B2C platforms. A B2C platform usually pays the trade-in rebate by gift card, which can be used in both self-operated and third-party stores (WP) or can only be used in self-operated stores (SR). The recycling models of B2C platforms also vary. To address the decision-making issues B2C and Internet recycling platforms, this paper considers four models: Model BWP, Model BSR(i.e., the B2C platform recycling itself and using WP or SR to pay the trade-in rebate), Model TWP and Model TSR(i.e., the B2C platform collaborating with an Internet recycling platform and using WP or SR to pay the trade-in rebate).The results imply that the B2C platform's optimal trade-in payment method depends on the utility discount rate in the SR model and the commission rate charged by the B2C platform. We also find that if the commission rate is above a given threshold, the optimal trade-in effort level in the WP model is higher than that in the SR model and the B2C platform should offer a higher subsidy in Model TWP than in Model TSR. Moreover, the proportion of the trade-in cost shared by the Internet recycling platform becomes an essential factor in the selection of the recycling model and the optimal effort level under different recycling models. We ultimately find that the recycling platform should collaborate with a B2C platform that pays the trade-in rebate by WP and offer a lower trade-in rebate if the commission rate is very high.

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