Leasing, trade-in for new, or the mixed of both: an analysis of new recycling modes driven by industry 4.0 technologies

Kun Wang, Yongjian Li, Xiaohang Yue and Chunxing Fan

International Journal of Production Research, 2024, vol. 62, issue 7, 2350-2369

Abstract: The circular economy has become a promising solution to electronic product reuse . The advanced technology of Industry 4.0 drives the recycling platform (RP) to carry out a variety of new business modes, which are important ways to realise a circular economy. In this article, we consider a monopolistic RP under trade-in for new mode, leasing mode, or their mixed mode, respectively. We develop a discrete-time game with infinite periods and use the Markov decision and Bellman equation to obtain the consumer’s perfect equilibria consumption strategies . By comparing different modes under RP’s profits, consumer surplus, and environment impact perspectives, we find that when the durability of leased refurbished product exceeds that of the resold refurbished ones, the mixed mode is better than the trade-in for new mode, which can achieve more platform profits, more consumer surplus, and less environment impact. By considering the three perspectives together, the mixed mode is not always better than the other two modes. The mixed mode is optimal only when the durability of leased refurbished one is relatively high. We also conduct extensive numerical research, show optimal service mode under three perspectives, and extend the effects of different qualities of recycled used products on optimal mode.

Date: 2024
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DOI: 10.1080/00207543.2022.2151660

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