Is Mixed Leasing and Trade-in for New Better than One or the Other in Recycling Platform?

Abstract

The circular economy has become a promising solution to the economic and environmental problems associated with increasing levels of electronic products consumption and electronic waste generation. This article considers a monopolistic recycling platform (RP) under trade-in for new, leasing and mixed mode. We develop an infinite period and discrete time game to use Bellman equation and Markov decision to obtain consumer’s perfect equilibria consumption strategies with given RP pricing. By comparing different modes based on profits, consumer surplus and environment impact perspective, we find that when the durability of leasing refurbished electronic products exceeds that of the reselling refurbished ones, the mixed mode is better than the TfN mode, which can achieve more platform profits, more consumer surplus, and less environmental impact. Consider three perspectives together, the mixed mode is not always better than the other two modes. Only when the durability of leasing refurbished ones is relatively large, the mixed mode is optimal mode. We also conduct extensive numerical research and show optimal service mode under three perspectives, and extend the effect of different quality of recycled used electronic products on optimal mode.

Keywords: Trade-in for new, Leasing, Mixed mode, Recycling platform.

JEL Classification: M2