Towards Circular Economy implementation: an agent-based simulation approach for business model changes

Abstract

This paper introduces an agent-based approach to study customer behavior in terms of their acceptance of new business models in Circular Economy (CE) context. In a CE customers are perceived as integral part of the business and therefore customer acceptance of new business models becomes crucial as it determines the successful implementation of CE. However, tools or methods are missing to capture customer behavior to assess how customers will react if an organization introduces a new business model such as leasing or functional sales. The purpose of this research is to bring forward a quantitative analysis tool for identifying proper marketing and pricing strategies to obtain best fit demand behavior for the chosen new business model. This tool will support decision makers in determining the impact of introducing new (circular) business models. The model has been developed using an agent-based modeling approach which delivers results based on socio-demographic factors of a population and customers' relative preferences of product attributes price, environmental friendliness and service-orientation. The implementation of the model has been tested using the practical business example of a washing machine. This research presents the first agent-based tool that can assess customer behavior and determine whether introduction of new business models will be accepted or not and how customer acceptance can be influenced to accelerate CE implementation. The tool integrates socio-demographic factors, product utility functions, social network structures and inter-agent communication in order to comprehensively describe behavior on individual customer level. In addition to the tool Electronic supplementary material The online version of this article (doi:10.1007/s10458-017-9365-9) contains supplementary material, which is available to authorized users. itself the results of this research indicates the need for systematic marketing strategies which emphasize CE value propositions in order to accelerate customer acceptance and shorten the transition time from linear to circular. Agent-based models are emphasized as highly capable to fill the gap between diffusion-based penetration of information and resulting behavior in the form of purchase decisions.

A Review and Evaluation of Circular Business Model Innovation Tools

“…Towards circular economy implementation: An agent-based simulation approach for business model changes [109] No Unclear for others to use, more of a 'black box' Linder M., Williander M.…”

Digitisation and the Circular Economy: A Review of Current Research and Future Trends

“…Hence, as argued in [13,14], blurring of the concept of CE has occurred since it is used in different ways. Furthermore, [15] argued that "there are various possibilities for defining [CE]" due to its complex and trans-disciplinary nature [9]. CE, is not a new concept; [16] reminds us that the term has been in existence since the 1970s, while [17] states that it appeared in academic literature in 1990 by Pearce & Turner (1990) [18], where the linkages between the environment and economic activities were analysed.…”

Towards circular economy implementation in manufacturing systems using a multi-method simulation approach to link design and business strategy

“…Finally, this model may be extended and linked to aspects of marketing and customer demand variation [33] to include potential revenue streams in order to consider profitability of circular systems.…”