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Idlefish or not? Online platform’s strategy of secondhand marketplace introduction in the presence of consumer’s uncertain preferences and strategic behavior

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Abstract

Secondhand marketplace has received a dramatic growth as secondhand trading becomes a sustainable way of life worldwide. We propose a game-theoretical model to explore online retail platform’s strategy of secondhand marketplace introduction when facing consumer’s uncertain preferences. The platform sells new product for the manufacturer and decides whether to open a secondhand product for consumers to purchase secondhand product. Consumers are strategic in their purchase of new product and secondhand product in two sequential periods. We find that the presence of secondhand marketplace induces the manufacturer to lower the retail price for new product when retail price of secondhand product is low but increase the price otherwise. The secondhand marketplace may benefit the platform when the retail price of secondhand product is moderate, but may harm the platform when the price is low or high, depending on the unit production cost of new product. Interestingly, it is never optimal for the manufacturer when the retail price of secondhand product is substantially low, but may be beneficial otherwise, depending on the unit production cost of new product. Examining the value of secondhand marketplace, it creates a win–win situation for the two parties when the retail price of secondhand product is not low, and improves the consumer surplus under certain circumstances. The extended case of consumer depreciation of secondhand product verifies the robustness of the basic model.

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Notes

  1. See https://www.alizila.com/recommerce-takes-off-in-china-as-apps-such-as-alibabas-idle-fish-make-recycling-easier/ (accessed on August 17, 2023).

  2. See https://www.sohu.com/a/521382194_120971445 (accessed on August 17, 2023).

  3. See https://ixtenso.com/retail-marketing/secondhand-trading-takes-off-in-china.html (accessed on August 17, 2023).

  4. See https://zhuanlan.zhihu.com/p/546176794?utm_id=0 (accessed on August 17, 2023).

  5. See https://baijiahao.baidu.com/s?id=1735773403221515962&wfr=spider&for=pc (accessed on August 17, 2023).

  6. See https://baijiahao.baidu.com/s?id=1747076286523233378&wfr=spider&for=pc (accessed on August 17, 2023).

  7. We consider exogenous price of secondhand product with two reasons. First, as the Introduction section describes, this study considers that consumers trade secondhand products not for profit. The consumers may be preference-oriented, fad-driven or environmentally-conscious. Second, in practice, the price of a secondhand product is the result of a joint decision by all the merchants in the secondhand market. In the case of used cars, for example, if an individual seller does not know the exact value of the car, it will be very difficult to sell it. Either the individual seller will lose money by selling it for less than it is worth, or will have to wait too long before someone may buy or sell the family’s overpriced secondhand car or even fail to sell it. So individual sellers are referring to the prices of other similar items in order to make more profit. See an illustrative example in the Appendix.

  8. When operating the secondhand marketplace, the online retail platform generally does not charge a fee for reselling service, but charges a fee for the service of inspection and guarantee. We consider non-negative value of \(\tau \) to be consistent with this practice. See also https://m.39zn.cn/article/184825.htm (accessed on August 17, 2023).

  9. See https://www.sohu.com/a/135867053_115514 (accessed on May 25, 2023).

  10. See https://k.sina.cn/article_6000526692_165a8c5640010090dj.html?ab=qiche&_rewriteTime=1684993947867 (accessed on May 25, 2023).

  11. See https://baijiahao.baidu.com/s?id=1752417836099848523&wfr=spider&for=pc (accessed on May 25, 2023).

  12. See http://www.bigdata-research.cn/content/202006/1085.html (accessed on May 25, 2023).

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Acknowledgements

This work was supported by the National Natural Science Foundation of China (Nos. 71801056, 71971205, 72188101, 72171220, 72091210/72091215,72371235), the Ministry of education of Humanities and Social Science Project (No. 22YJC630011) and Guangdong Basic and Applied Basic Research Foundation (No. 2022B1515120060).

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Authors and Affiliations

  1. International Institute of Finance, School of Management, University of Science and Technology of China, Jinzhai Road 96, Hefei, 230026, Anhui Province, People’s Republic of China

    Yong Zha & Yumin Sun

  2. School of Management, Guangzhou University, Guangzhou, 510006, People’s Republic of China

    Yujing Chen

  3. School of Business, Nanjing Audit University, Nanjing, 211815, People’s Republic of China

    Linlin Zhao

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  1. Yong Zha
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Correspondence to Yujing Chen.

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Appendices

Appendices

Appendix A: Comparisons of cases N and I

See Table 5.

Table 5 Price, demand and profit changes between cases N and I
Full size table

Appendix B: Threshold values of \({{\varvec{p}}}_{0}\), \({\varvec{c}}\) and \({\varvec{\tau}}\)

See Table 6.

Table 6 Threshold values on \({p}_{0}\), \(c\), and \(\tau \)
Full size table
$$ \tilde{c}_{2} = \frac{{\delta \left( {2p_{0} - \alpha \delta } \right)\left( {1 - \phi } \right)^{2} + \sqrt {\delta^{2} \left( {1 - \phi } \right)^{2} \left( {4\left( {p_{0} - \tau } \right)\left( {1 - \alpha } \right)\delta \left( {\alpha \delta - p_{0} } \right) - 8\left( {p_{0} - \tau } \right)\left( {1 - \alpha } \right)\delta \left( {\alpha \delta - p_{0} } \right)\phi + \left( {2p_{0} - \alpha \delta } \right)^{2} \phi^{2} } \right)} }}{{\delta^{2} \left( {1 - 2\phi } \right)}}, $$
$$ \begin{gathered} \tilde{c}_{3} = \frac{1}{{\delta^{2} \left( {1 - 2\phi } \right)}}(\delta \left( {1 - \phi } \right)\left( {p_{0} \left( {2 - \alpha } \right)\left( {1 - \phi } \right) - \tau \left( {2 - \alpha - \phi + \alpha \phi } \right)} \right) - \surd (\delta^{2} \left( {1 - \phi } \right)^{2} (\alpha^{2} \left( {1 - \delta } \right)\delta^{2} \left( {1 - 2\phi } \right) - \hfill \\ 2\tau \alpha^{2} \delta \left( {1 - \delta - 2\phi + 2\delta \phi } \right) + \tau^{2} \left( {4 - \left( {4 - \alpha } \right)\alpha \left( {1 - \delta } \right) - 3\delta - 4\phi + 2\left( {3 - \alpha } \right)\left( {\alpha + \left( {1 - \alpha } \right)\delta } \right)\phi + \left( {1 - \alpha } \right)^{2} \phi^{2} } \right) + \hfill \\ p_{0}^{2} \left( {2 - \alpha } \right)^{2} \left( {\left( {1 - \phi } \right)^{2} - \delta \left( {1 - 2\phi } \right)} \right) + 2p_{0} (\alpha \delta \left( {2 - \alpha } \right)\left( {1 - \delta } \right)\left( { - 1 + 2\phi } \right) + \tau (\left( {2 - \left( {4 - \alpha } \right)\alpha } \right)\left( { - 1 + \delta } \right) + (2 - 4\delta + \hfill \\ \alpha \left( {2\alpha - 7 + 8\delta - 2\alpha \delta } \right))\phi - \left( {2 - \alpha } \right)\left( {1 - \alpha } \right)\phi^{2} ))))), \hfill \\ \end{gathered} $$
$$ \begin{aligned} \tilde{c}_{4} & = \frac{1}{{\delta ^{2} \left( {1 - 2\phi } \right)}}(\delta \left( {1 - \phi } \right)\left( {p_{0} \left( {2 - \alpha } \right)\left( {1 - \phi } \right) - \tau \left( {2 - \alpha - \phi + \alpha \phi } \right)} \right) \\ & \quad + \surd (\delta ^{2} \left( {1 - \phi } \right)^{2} (\alpha ^{2} \left( {1 - \delta } \right)\delta ^{2} \left( {1 - 2\phi } \right) - 2\tau \alpha ^{2} \delta \left( {1 - \delta - 2\phi + 2\delta \phi } \right) \\ & \quad + \tau ^{2} \left( {4 - \left( {4 - \alpha } \right)\alpha \left( {1 - \delta } \right) - 3\delta - 4\phi + 2\left( {3 - \alpha } \right)\left( {\alpha + \left( {1 - \alpha } \right)\delta } \right)\phi + \left( {1 - \alpha } \right)^{2} \phi ^{2} } \right) \\ & \quad + p_{0}^{2} \left( {2 - \alpha } \right)^{2} \left( {\left( {1 - \phi } \right)^{2} - \delta \left( {1 - 2\phi } \right)} \right) + 2p_{0} (\alpha \delta \left( {2 - \alpha } \right)\left( {1 - \delta } \right)\left( { - 1 + 2\phi } \right) \\ & \quad + \tau (\left( {2 - \left( {4 - \alpha } \right)\alpha } \right)\left( { - 1 + \delta } \right) + (2 - 4\delta + \alpha \left( {2\alpha - 7 + 8\delta - 2\alpha \delta } \right))\phi - \left( {2 - \alpha } \right)\left( {1 - \alpha } \right)\phi ^{2} ))))), \end{aligned} $$
$$ \tilde{c}_{5} = \frac{{\alpha \delta \left( {1 - \phi } \right)^{2} - \sqrt {\delta \left( {1 - \phi } \right)^{2} \left( {\alpha \delta \left( {4\tau - 8\tau \phi + \alpha \phi^{2} } \right) - 4p_{0} \tau \left( {1 - 2\phi } \right)} \right)} }}{{\delta \left( {1 - 2\phi } \right)}}, $$
$$ \overline{c}_{2} = \alpha \left( {1 - \phi } \right) + \frac{{2\sqrt {\delta^{2} \left( {\alpha \delta - p_{0} } \right)\left( {p_{0} \left( {3 - 4\alpha } \right) + \alpha \left( {1 + 4\tau - 4p_{0} \left( {1 - \alpha } \right) - 4\tau \alpha } \right)\delta } \right)\left( {1 - \phi } \right)^{2} } }}{{\delta^{2} }}, $$
$$ \begin{aligned} \bar{c}_{3} & = \frac{1}{{\delta \left( {4\alpha + \delta - 4} \right)}}(\delta \left( {p_{0} \left( {6 - \alpha \left( {3 + 4\delta } \right)} \right) - 3\tau \left( {1 - \alpha } \right)} \right)\left( { - 1 + \phi } \right) \\ & \quad + \surd (\delta (\delta (2\tau \alpha \left( {1 - \alpha } \right)\left( {1 - 4\alpha } \right)\left( {1 - \delta } \right)\left( { - 4 + 4\alpha + \delta } \right) \\ & \quad + \alpha ^{2} \left( {4 - 4\alpha \left( {1 - \delta } \right) - \delta } \right)\left( {1 - \delta } \right)\left( {4 - 4\alpha - \delta } \right) + \tau ^{2} \left( {1 - \alpha } \right)^{2} \left( {3\left( { - 1 + \delta } \right) - 4\alpha \left( {1 - 4\alpha - \delta } \right)} \right)) \\ & \quad + 2p_{0} \delta (\alpha \left( {6 - \alpha \left( {9 - 4\alpha + 4\delta } \right)} \right)\left( {1 - \delta } \right)\left( {4 - 4\alpha - \delta } \right) \\ & \quad + \tau \left( {1 - \alpha } \right)\left( {6 - 6\delta + \alpha \left( {5 - 9\delta + 4\left( {5\alpha \delta - \alpha \left( {9 - 4\alpha } \right) + \delta ^{2} } \right)} \right)} \right)) \\ & \quad + p_{0}^{2} (\alpha (48 + \delta (12 - 60\delta + \alpha \left( {13 + 16\alpha ^{2} - 3\delta \left( {7 - 8\delta } \right) - 4\alpha \left( {17 - 9\delta } \right)} \right)))\\ &\quad - 48\left( {1 - \delta } \right)))\left( {1 - \phi } \right)^{2} )), \\ \end{aligned} $$

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Zha, Y., Sun, Y., Chen, Y. et al. Idlefish or not? Online platform’s strategy of secondhand marketplace introduction in the presence of consumer’s uncertain preferences and strategic behavior. Ann Oper Res 333, 331–359 (2024). https://doi.org/10.1007/s10479-023-05584-z

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