Closed-loop Supply Chain Models Considering Trade-in Decisions

With the advances in science and technology and the development of the economy,products upgrade more rapidly,which leads to the issues such as waste of resources and environmental pollution becoming increasingly prominent.It is no doubt that we should not only focus on the development of the economy but also pay more attention to saving resources and protecting the environment.To stimulate consumption,save resources,protect the environment,and promote the development of a circular economy,the government and firms have set their sights on a new form of promotion that is called “trade-in”.Trade-in allows customers to return their old products in exchange for trade-in rebates that can be redeemed when they buy new products.As an important way to boost sales and enhance the collection of old products,trade-in programs are widely implemented in industries such as household electrical appliances,electronics,and automobiles.This dissertation studies closed-loop supply chain models when considering trade-in decisions based on the specific problems faced in trade-in practice.Specifically,I first investigate when trade-in service can be implemented by either the upstream manufacturer or the downstream retailer,who should provide the trade-in service? Then,I explore when a manufacturer sells products through both retail and direct channels,which channel the manufacturer should choose to provide the trade-in service? Furthermore,I examine when the manufacturer providing the trade-in service can refurbish the returned old products and resell them to either the primary market or the secondary market,where should the manufacturer choose to resell the refurbished products? Finally,I study when the government can provide either the trade-in subsidy or the consumption subsidy to subsidize customers,how do manufacturers and the government make optimal decisions based on their respective goals in closed-loop supply chains with trade-ins? The analysis regarding the above research questions reveals several notable findings and I summarize them as follows:Firstly,the optimal strategy for trade-in service provider selection in closed-loop supply chains is studied.As trade-in service can be offered by either the manufacturer or the retailer,the party offering the trade-in service faces the trade-off between the fixed trade-in cost incurred and the additional revenue generated and then decides whether to offer the trade-in service.By conducting a game-theoretic approach,I analytically explore four trade-in models that include the benchmark case without trade-ins,trade-in service is offered by the manufacturer or the retailer,and the manufacturer delegates the trade-in service to the retailer.The results 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 service,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.In addition,the trade-in scenarios always benefit the environment and old customers but hurt new customers.The social welfare would 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.Secondly,the optimal strategy for trade-in channel selection under dual-channel sales is studied.To address the issue that a manufacturer should consider whether to implement trade-in service through the retail channel or the direct channel when it adopts the dual-channel of distribution,I analytically investigate four trade-in models that include the benchmark case without trade-ins,trade-in service is implemented through the retail channel or the direct channel or the dual channel and obtain the corresponding equilibrium outcomes.The results show that providing the trade-in service through the retail channel would ease the price competition between the two channels and lead to a higher sales quantity in the retail channel while providing the trade-in service through the direct channel would intensify channel competition,and result in a higher sales quantity in the direct channel,and providing the trade-service through the dual-channel would increase the sales quantity of old customers but decrease the sales quantity of new customers.No matter which channel is adopted to provide the trade-in service,it can always increase the manufacturer’s profit.Moreover,the direct selling cost and the residual value of old products have a significant impact on the trade-in channel choices of the manufacturer.To be specific,when the direct selling cost is low,providing the trade-in service through the direct channel is the manufacturer’s best choice;when the direct selling cost is high,the retail channel is better off;when the direct selling cost is moderate and the residual value of old products is low,providing the trade-in service through the dual channel is more preferable for the manufacturer.Furthermore,the retailer always prefers the trade-in service provided through the retail channel,and even if the trade-in service is provided through the direct channel,the retailer does not always at a disadvantage,while providing the trade-in service through the dual-channel has no impact on the retailer.In addition,providing the trade-in service through the dual-channel would increase the total demand,improve the environmental benefits,and keep the stability of the dual-channel supply chain.Thirdly,the optimal strategy for the resell market selection of the manufacturer with trade-ins is studied.To address the issue that a manufacturer providing trade-in service should consider whether to refurbish the returned old products and resell them with the new products in the primary market by adopting a single-market strategy or resell them to a separate secondary market by adopting a dual-market strategy,I analytically examine the two reselling strategy and obtain the corresponding refurbishing conditions and equilibrium outcomes.The results show that regardless of which market strategy the manufacturer is adopted,with different manufacturing costs and customers’ willingness to pay for the refurbished products,there exist four strategies: No trade-ins,no refurbishing,partial refurbishing,and full refurbishing.When the market exists refurbished products,the price of refurbished products is higher than the residual value of old products that the manufacturer directly disassembles.Although adopting the dual-market strategy is an effective way to avoid the cannibalization effect between new and refurbished products and enhance the demand of the new product and the customer surplus of the new segment in the primary market,it is not always better than the single-market strategy.There is a threshold for the size of the potential secondary market above which the manufacturer prefers the dual-market strategy.However,if the size of the secondary market is small,the manufacturer prefers the single-market strategy because although the dual-market strategy reduces the risk of cannibalization,it also reduces the manufacturer’s ability to sell to those primary market customers with less willingness to pay.Finally,the optimal strategy for the manufacturer’s trade-in pricing and the government subsidies under different government subsidy policies is studied.To address the issue that a social-welfare-maximizing government should consider whether to provide a trade-in subsidy or a consumption subsidy to customers under the situation that the manufacturer provides trade-ins,I analytically investigate the Stackelberg game between the government and the manufacturer under four cases: no subsidy,providing the trade-in subsidy only,providing the consumption subsidy only,and providing the mixed subsidy that includes both the trade-in subsidy and consumption subsidy.The results show that compared with no subsidy policy,no matter which subsidy policy is adopted,it can improve the manufacturer’s profit,environmental benefits,and social welfare.The product durability has a significant impact on the government’s subsidy policy.Specifically,when the product durability is low,the mixed subsidy policy is better for the manufacturer,the environment,and social welfare,but the total government expenditure is also higher;when the product durability is moderate,the mixed subsidy policy is better for the environment and social welfare,while the manufacturer prefers the consumption subsidy policy;when the product durability is high,the mixed subsidy policy is better for the manufacturer and social welfare,while the consumption subsidy is better for the environment.Since the three subsidy policies have their advantages and disadvantages from different perspectives under different conditions,the government should trade off the economic benefits,environmental benefits,social welfare,and the total expenditure to choose the right subsidy policy.The above results not only theoretically enrich the relevant theories of supply chain management,trade-in strategies,and government subsidy policies but also support some of the current trade-in policies and practices,and also provide useful guidelines for firms to choose appropriate trade-in strategies and for the government to design effective subsidy policies in practice.