Abstract:

China is a big country in the production and consumption of electrical and electronic products. How to properly dispose of waste household appliances has become an urgent question to be solved. In recent years， in addition to selling new products， online platforms have begun to assist manufacturers in launching trade-in programs for a variety of home appliances （for example， air conditioners， refrigerators， and televisions） and provide rebates to consumers who participate in trade-in programs. Although online platforms can effectively promote the trade-in of home appliances， the different sales models provided by online platforms will affect the strategic interaction between online platforms and manufacturers， thus bringing new challenges for them. In view of this， there is an urgent need to provide decision-making suggestions for online platforms and manufacturers to operate trade-ins.To address the above issues， a two-period model framework is constructed， in which products will be treated as new in the first period and old in the second period. The consumers are considered to behave strategically： consumers make optimal decisions by comparing their total utility from two periods under different options. Therefore， the number of consumers under different options can be endogenously given by analyzing heterogeneous consumer behaviors， and then the profit functions of manufacturers and online platforms can be constructed， and their optimal trade-in operation strategies can be formulated. In this paper， online platforms provide manufacturers with two sales format： reselling format and agency selling format， and manufacturers rely on online platforms to implement trade-ins. Based on the above two sales format， game-theoretic models are established， that incorporating manufacturers， online platforms and consumers， in the case of with trade-in and without trade-in programs， respectively. Then， these two firms’ preferences for trade-ins can be analyzed by comparing their profits with and without trade-ins. In addition， the impacts of product depreciation rate on the profits of the manufacturer and the online platform are analyzed， in order to obtain the manufacturer's product durability design strategy and the impact of that strategy on the profit of the online platform.It is implied that both the sales format and the implementation of trade-ins would affect the manufacturer and online platform's preferences for product durability. In particular， it is only necessarily for the manufacturer to adopt a “planned obsolescence” strategy if the product is sold through an agency selling format without trade-ins， and this strategy also benefits the online platform. Finally， regardless of the format in which the manufacturer's products are sold， the manufacturer should carry out trade-in for the products. However， it is better for the online platform to consider the sales format， the product depreciation rate and the manufacturer's production cost when deciding whether to assist the manufacturer to implement the trade-in. Only when the manufacturer implements trade-in for those products with relatively low depreciation rate and production cost， should the online platform assist the manufacturer in both sales format. Otherwise， when the manufacturer implements trade-ins for those products with high depreciation rates， the online platform should only assist the manufacturer in implementing trade-ins under the reselling format， but refuse to assist under the agency selling format.

Key words: online platform, trade-in, product durability, sales format, pricing