Optimal trade-in and third-party collection authorization strategies under trade-in subsidy policy

Purpose - This paper aims to study whether the recycling of a third party competes with the trade-in service of a manufacturer, and explores the optimal trade-in and third-party collection authorization strategies for the manufacturer. Design/methodology/approach - According to whether to authorize a third party to collect its used products, the manufacturer has two choices: one is not authorization (NA); the other is authorization (A). This paper uses profit-maximization model to investigate the optimal decisions of the manufacturer and the third party under NA and A, respectively, and then explores which choice is better for the manufacturer. Findings - It is observed that there is a competition between trade-in service and third-party recycling when the durability parameter of the used product is relatively small. Moreover, when the durability parameter of the used product is relatively large, A is always better choice for the manufacturer; otherwise, NA is a better choice except for the case that the unit trade-in subsidy is low and the salvage of the used product is high. Practical implications - These results provide managerial insights for the manufacturer and the third party to make decisions in the field of recycling. Originality/value - This paper is among the first papers to study the competition between trade-in program and third party's collecting program under government's trade-in subsidy policy. Moreover, this paper presents the conditions under which the manufacturer should authorize or not authorize the third party to collect its used products.