Optimal prices and trade-in rebates for successive-generation products with strategic consumers and limited trade-in duration

Shu Hu, Zu-Jun Ma and Jiuh-Biing Sheu

Transportation Research Part E: Logistics and Transportation Review, 2019, vol. 124, issue C, 92-107

Abstract: Firms usually offer trade-in programs to entice consumers to purchase next generation products. By considering the purchase behavior of both myopic consumers and strategic consumers, we propose a game-theoretic analytical model to determine the optimal price of the next generation products and the optimal trade-in rebate. We find that firm’s optimal price of the next generation products increases with the incremental value. The optimal trade-in rebate decreases with the trade-in duration. The firm’s optimal profit increases with the trade-in duration, but decreases with the incremental value.

Keywords: Trade-in duration; Trade-in rebate; Pricing; Consumer behavior; Products upgrade (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (21)

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DOI: 10.1016/j.tre.2019.02.004

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