Trade‐in program options in a retailer‐led supply chain

Abstract

Firms offer trade‐in programs that consumers trade an old product and receive trade‐in rebate when buying a new one. To study whether the manufacturer or the retailer should introduce a trade‐in program, we build a Stackelberg game that consists of one manufacturer and one retailer by considering old and new consumers in a retailer‐led supply chain. We find that when the production cost of a product is high under no trade‐in program, old consumers do not purchase the product. When the retailer provides the trade‐in program, there are “lose–win” situation for the manufacturer and retailer. However, when the manufacturer provides the trade‐in program, there are “win–win” situation for the manufacturer and retailer. Then, we find that the manufacturer (retailer) can benefit more from providing trade‐in program by themselves than that provided by the other one.