Proceedings of the 5th International Conference on Economic Management and Model Engineering, ICEMME 2023, November 17–19, 2023, Beijing, China

Research Article

Optimal Trade-in Return Policy Decision Based on Numerical Simulation

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  • @INPROCEEDINGS{10.4108/eai.17-11-2023.2342668,
        author={Jie  Xi},
        title={Optimal Trade-in Return Policy Decision Based on Numerical Simulation},
        proceedings={Proceedings of the 5th International Conference on Economic Management and Model Engineering, ICEMME 2023, November 17--19, 2023, Beijing, China},
        publisher={EAI},
        proceedings_a={ICEMME},
        year={2024},
        month={2},
        keywords={trade-in; return policy; simulation; decision making},
        doi={10.4108/eai.17-11-2023.2342668}
    }
    
  • Jie Xi
    Year: 2024
    Optimal Trade-in Return Policy Decision Based on Numerical Simulation
    ICEMME
    EAI
    DOI: 10.4108/eai.17-11-2023.2342668
Jie Xi1,*
  • 1: Shanghai University
*Contact email: xijie_x@163.com

Abstract

In order to retain existing customers and drive sales, firms introduce trade-in programs where participating consumers (referred to as trade-in consumers) have the option to return and request a refund for newly purchased products if they are dissatisfied. This study utilizes two mathematical analytical models and numerical simulation analysis to investigate the viability of implementing a trade-in return policy for trade-in consumers. Our findings indicate that when the hassle cost associated with consumer returns is low, implementing a trade-in return policy leads to higher profitability for the firm. Conversely, when the hassle cost is high, the firm benefits more from not implementing such a policy. Furthermore, the decision to implement a trade-in return policy is influenced by the product's durability, with higher durability increasing the firm's inclination to adopt such a policy. Lastly, implementing a trade-in return policy contributes to higher consumer surplus.