New Practice of E-Commerce Platform: Evidence from Two Trade-In Programs

Abstract

In the context of developing the digital platform economy, trade-in programs have become an effective strategy for e-commerce platforms to stimulate consumption. Many head e-commerce platforms have launched their own trade-in programs. However, the existing research on trade-in programs is still stuck in the traditional trade-in model. The purpose of this study is to explore whether there is a new and more beneficial trade-in program. In this paper, we construct the Stackelberg game model between a brand owner and a B2C e-commerce platform under two trade-in programs and use optimization theory to obtain the equilibrium results of the model. The results indicate that the performance improvement of the new-generation product will promote the increase in two-generation products’ price under traditional trade-in programs, the price of the new-generation product will increase, and the price of the previous-generation product will decrease under new trade-in programs. The brand owner always prefers traditional trade-in to new trade-in. However, the e-commerce platform prefers traditional trade-in to new trade-in just when the previous-generation product is durable enough and the performance improvement of a new-generation product is small enough; otherwise, it prefers new trade-in to traditional trade-in. These findings are beneficial to the operational practices of e-commerce platforms and brand owners.

Keywords

• e-commerce platforms
• trade-in program
• two-generation products
• myopic consumer
• Stackelberg game