Management of trade-in modes by recycling platforms based on consumer heterogeneity

Today, the world has entered the era of the circular economy, and environmental regulations have become more stringent. This article considers a monopolistic recycling platform (RP), which offers three recycling strategies (trade-in for cash, trade-in for refurbishment, and trade-in for new) to generate more profits based on the heterogeneity of consumers in terms of perceived quality. There are three modes of RPs with diversified recycling strategies: (1) only trade-in for cash (e.g., Lehuiso); (2) trade-in for cash and for refurbishment (e.g., Gazelle); and (3) trade-in for cash, for refurbishment, and for new coexisting (e.g., Suhuishou). We develop a game model and derive optimal decisions of the RP under the three trade-in modes respectively. Comparing the different trade-in modes, we find that for the RP, the decision of which mode to offer among trade-in for cash, for refurbishment, and for new service, depends on the quality depreciation coefficients of used and refurbished products and the value of new products. We also conduct extensive numerical analysis and show the optimal service strategies for the three trade-in modes.