Impacts of selling models: Who should offer trade-in programs in e-commerce supply chains?

Although some prior studies have examined the optimal trade-in providers in supply chains, the impacts of alternative online selling models like reselling and agency selling that are widely adopted in the e-commerce environment are under-explored. Traditionally, both the manufacturer and retailer have incentives to offer trade-in programs to consumers in a supply chain. However, this is no longer true when an agency selling model is implemented. In this paper, we investigate the equilibrium “trade-in provider” under the two selling models respectively in a stylized e-commerce single-manufacturer single-e-tailer supply chain. Our findings show that different selling models do have distinct influences on the two firms’ preferences of who should provide the trade-in program. Particularly, under the reselling model, there is always a conflict between the two firms regarding who should provide trade-ins, which is consistent with the findings in related literature; however, under the agency selling model, there are some win-win cases under which the two firms possess consistent preferences on the trade-in format. Furthermore, the “boxed pigs game” equilibrium may appear under agency selling, where either of the two firms has to provide the trade-in program, although this is not their most preferred trade-in format. The robustness of our main results has been well verified by extending our study to consider (i) the case where the e-tailer can be delegated to implement trade-ins, (ii) the case where the e-tailer is the first-mover in determining whether to provide trade-ins, and (iii) the reselling and agency selling models co-exist.