Research On A Firm's Profitability And Environmental Implications In Different Secondhand Transaction Modes

With worldwide economic development and the improvement of people's lives,consumers often discard use.d products that can still provide service when they update their products.For the protection of environment and sustainable devel-opment of the economy,more and more industrial enterprises selling new products are launching activities to encourage consumers to better handle their used prod-ucts.For example,IKEA and Patagonia have launched self-built C2C(customer-to-customer)platforms to encourage consumers to buy and sell used products,which we denote as the self-built C2C mode.Furthermore,IKEA also promotes secondhand transactions in the form of repurchase and resale,which we denote as the self-built C2B2C(customer-to-business-to-customer)mode.On the one hand,enabling consumers to buy secondhand products easily will reduce the sales of new products.On the other hand,allowing consumers to sell their used products more easily can encourage them to update to new products,thereby increasing the sales of new products.Therefore,whether encouraging secondhand transactions is good or bad for the firm is uncertain.The economic and environmental impli-cations are worth studying.This paper studies whether a firm should provide its customers with support for trading used goods under different secondhand trans-action modes,and then analyzes the economic and environmental implications.Firstly,we study the economic and environmental implications under the self-built C2C mode in the absence of a third-party C2C platform.A profit-maximizing firm sells two generations of products(initial and upgraded versions)in two stages and decides their prices.If the firm provides a self-built C2C plat-form,consumers can sell their used products in the second stage;otherwise,the used products cannot be sold.The secondhand price under self-built C2C mode is the market clearance price.We find that when the two generations of the products are similar(i.e.,the durability of the used product is high while the improvement of the new product is low),providing a C2C platform can increase the profitability of the firm.Furthermore,when a product's environmental pol-lution arises mainly during production stage(production-dominant product)or disposal stage(disposal-dominant product)and the product has medium durabil-ity and improvement,providing a C2C platform can simultaneously increase the economic and environmental benefits of the firm,i.e.,it is a win-win strategy.When the product's environmental pollution arises mainly during reuse stage of used products(reuse-dominant product),providing a C2C platform will reduce the environmental benefits.When considering the impact of C2C platforms on product value and outside options of consumers,our main results still hold.Secondly,we study the economic and environmental implications under self-built C2C mode with the existence of a third-party C2C platform.A profit-maximizing firm sells a product that has a life cycle of only two periods in an infinite horizon and decides its price.In each period,consumers can buy and sell used products through two C2C platforms,and the secondhand price is the market clearance price.No fee will be charged when the self-built C2C platform is matched first,otherwise,the third-party C2C platform will charge the sellers of used products a certain percentage of the transaction price.We find that when the durability of the product is medium,the existence of the third-party C2C platform will increase the profitability of the firm,whereas when the durability of the product is low,profittability will decrease.The firm can improve its profitability and the environmental benefits by providing a self-built C2C platform.We also find that the introduction of the self-built C2C platform is not beneficial to all consumers.The self-built platform will lead used-product buyers to pay more and the sellers get more money,i.e.,it is harmful to the buyers but beneficial to the sellers.Finally,we study the economic and environmental implications under self-built C2B2C mode.Different from the self-built C2C mode,under self-built C2B2C mode,the firm repurchases used products from consumers at a certain price and then resells them to other consumers at the same price.Thus,there is a fixed cost under self-built C2B2C mode because of freight,inventory,and other factors.The firm needs to simultaneously decide the selling price of new prod-ucts and the repurchasing price of used products.We find that if the fixed cost under C2B2C mode is low,the company should choose the base mode(providing neither a self-built C2C platform nor a C2B2C platform)when products have low durability,choose C2B2C mode when products have medium durability,and choose C2C mode when products have high durability.We also find that for PD(production-dominant)or DD(disposal-dominant)products,when the fixed cost under C2B2C mode is high and the product durability is medium,choosing C2C mode can not only maximize the economic benefits of the firm but also increase the environmental benefits,i.e.,it is a win-win strategy.In contrast,for RD(reuse-dominant)products,when the fixed cost under C2B2C mode is low and the product durability is medium,choosing C2B2C mode is a win-win strategy.