Trade‐in for Cash or for Upgrade? Dynamic Pricing with Customer Choice
| Autor: | Yongbo Xiao, Sean X. Zhou |
|---|---|
| Rok vydání: | 2019 |
| Předmět: |
Customer choice
business.industry media_common.quotation_subject 05 social sciences Management Science and Operations Research Industrial and Manufacturing Engineering Profit (economics) Microeconomics Upgrade Management of Technology and Innovation Cash 0502 economics and business New product development Dynamic pricing 050211 marketing Business 050203 business & management media_common |
| Zdroj: | Production and Operations Management. 29:856-881 |
| ISSN: | 1937-5956 1059-1478 |
| DOI: | 10.1111/poms.13140 |
| Popis: | Trade‐in programs for electronics products, e.g., mobile phones, have been increasingly popular. These programs target at customers (we call them “bargainers”) who seek to salvage or upgrade their old devices. There are two widely adopted trade‐in options: trade‐in‐for‐upgrade and trade‐in‐for‐cash. In this study, we consider a firm who offers both trade‐in options, that is, a hybrid trade‐in program, to acquire old products, then refurbishes and resells them, together with new product over a finite selling horizon. The bargainers choose which option to trade in their products while new customers decide whether to buy a new product or a refurbished one. When the selling price of new product is exogenous, we derive the optimal trade‐in prices of old product and resale price of refurbished product. We show that the optimal trade‐in and resale policies are of a threshold‐type and trade‐in‐for‐upgrade should be offered with a premium refund (compared to trade‐in‐for‐cash) only in early periods of the selling horizon. We further consider two variants of the above base model. In the first extension, the new product has a fixed amount of initial inventory and is not replenishable during the selling horizon. In the second extension, the new product price can also be determined by the firm. Our numerical results demonstrate that the hybrid trade‐in program could generate significantly more profit than either upgrade‐only or cash‐only trade‐in program. |
| Databáze: | OpenAIRE |
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