A s more customers purchase pre-owned apparel, firms are increasingly adopting resale based business models. These models typically operate as either (i) a trade-in and resale program, wherein a firm offers a trade-in discount on a new product and resells the traded-in products, or (ii) a P2P resale marketplace where customers can buy and sell used products to each other. Since different firms choose different resale strategies, it is not clear which strategy is more profitable. Furthermore, although firms that adopt each resale model also promote their environmental benefits, there are concerns that these firms are greenwashing, that is, misrepresenting the environmental benefits of their business models. Hence, we investigate the profitability and environmental impacts of these resale marketplace models and find that the trade-in model may be more profitable despite the lower reverse logistics cost in the P2P model, and the P2P resale marketplace may be more profitable despite the trade-in program having direct control over the supply and demand of used products. Furthermore, both models can be better for the environment depending on the product characteristics and perceived quality difference between the used products sold in these programs. We further identify when each model is better for profitability and environment concurrently and when there is misalignment. Other results and managerial insights include comparative pricing of new and used products, market coverage, total sales, and resales, and the impact of product durability on pricing. The insights presented in this study provide useful guidelines for firms, non-governmental organizations, and environmental advocacy groups.
This paper analyzes the impacts of China’s Green Fence and National Sword Programs, under which strict contamination limits were imposed on recyclable materials, besides prohibiting imports of low quality recyclables. Specifically, this study investigates the impacts of this policy on landfills, and the risks to the U.S. plastics secondary materials market and material recovery facilities (MRFs). A hierarchical regression analysis reveals the significant impacts of China’s Green Fence and National Sword polices on the amount landfilled plastic. Controlling for oil prices, producer price index (PPI), and amount of plastic scrap exported, our findings show that the Green Fence had no statistically significant impact on the amount of plastic landfilled in the U.S. However, the quantity of plastic landfilled in the U.S. increased by 23.2% following the implementation of National Sword. Furthermore, analysis of the annual reports submitted by registered MRFs in New York (NY) state reveals that the total amount of plastic recovered by them has decreased. We suggest that demand creation and investments that improve the quality of bales are needed to help solve this economic dilemma.
Business users (suppliers) of information technology (IT) equipment often contract with third party remanufacturers (3PRs) for the end‐of‐use disposition of their used electronic equipment. Our goal in this research is to develop a model to analyze contracts consisting of an upfront payment (t) and a revenue share (r) between a supplier and 3PR, study their impact on disposition decisions, and explore the impact of 3PR risk‐aversion and quality uncertainty on optimum contracts. We model a Stackelberg game where the supplier offers risk protection from quality uncertainty to a 3PR. The 3PR faces a convex increasing remanufacturing cost and a sales revenue that is increasing and concave in the volume resold. We show general conditions under which a unique contract exists and can be expressed in closed form. We calibrate our model using a dataset on supplier contracts and equipment conditions provided by a 3PR. Our managerial insights are derived from the data and summarized as follows. First, there is a benefit to suppliers from characterizing the quality of used assets. Therefore, they should consider adjusting contracts to reflect asset quality. Second, suppliers can increase profit by contracting based on quality grade and using a portfolio of contracts. Third, we show that the asset age impacts contract terms, with suppliers with assets at a lower age keeping a higher revenue share and observing a greater fraction of equipment remanufactured. This suggests that suppliers should consider the benefits of disposition contracts when making equipment replacement decisions.
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