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Self-building or cooperating with a service platform: how should a dual-channel firm implement a trade-in program?

Author

Listed:
  • Guang Yang

    (Chongqing University)

  • Bo He

    (Chongqing University
    Chongqing Key Laboratory of Logistics at Chongqing University)

  • Ruohan Ma

    (Chongqing University)

Abstract

Business practices demonstrate that firms can offer dual-channel trade-in programs by cooperating with a third-party trade-in service platform (i.e., cooperation mode) or on their own (i.e., self-building mode). This paper develops an analytical model to investigate the effect of a specific trade-in operation mode on the profitability of a dual-channel firm that implements a trade-in program. We characterize the equilibrium between the firm and the service platform. We identify the threshold of the self-building operational cost, above (below) which the firm’s profit under the self-building mode is less (greater) than that under the cooperation mode. We find that the cooperation mode is more beneficial to both consumers and a firm compared with the self-building mode when the consumer waiting cost is minor-to-moderate and the market potential of the cooperation mode is relatively high, which will improve social welfare due to the decrease in operational cost and product price. Finally, we consider a cooperative bargaining situation under the cooperation mode. We find that both the firm and the service platform will obtain more profits from the bargaining solution in a bilateral negotiation compared with the case of a dynamic game.

Suggested Citation

  • Guang Yang & Bo He & Ruohan Ma, 2025. "Self-building or cooperating with a service platform: how should a dual-channel firm implement a trade-in program?," Electronic Commerce Research, Springer, vol. 25(3), pages 1521-1544, June.
  • Handle: RePEc:spr:elcore:v:25:y:2025:i:3:d:10.1007_s10660-023-09746-w
    DOI: 10.1007/s10660-023-09746-w
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