| Author: | Pang, Chen |
| Title: | Dynamic pricing strategy for new products in the presence of consumer-to-consumer resale market |
| Advisors: | Jiang, Li (LMS) |
| Degree: | Ph.D. |
| Year: | 2025 |
| Subject: | Secondhand trade Consumption (Economics) Consumer behavior Retail trade -- Management Pricing New products -- Prices Hong Kong Polytechnic University -- Dissertations |
| Department: | Department of Logistics and Maritime Studies |
| Pages: | xxi, 287 pages : color illustrations |
| Language: | English |
| Abstract: | As one of the fastest-growing segments in retail industry, consumer-to-consumer (C2C) resale markets stand out to become a mainstream online shopping experience. One report reveals that 64% of shoppers shift spending away from purchasing new items to look for used ones, and 82% of consumers weigh the resale value of an item before purchasing it. The presence of C2C resale markets expands the purchase options for consumers, granting them the liberty of deciding when to purchase, what to purchase, and where to purchase, forcing enterprises to adjust their selling strategies for new products to suit the market change thus occurs. In practice, enterprises are adapting to the rise of C2C resale markets by aiming to provide consumers with resale revenue, entice them to make repeat purchases, and generate profits. Simultaneously, consumers face uncertainty about the value of used products in C2C resale transactions. They strategically act as individual suppliers, postponed demanders, or repeat purchasers. These behaviors interactively influence the demand for both new and used products, thereby affecting the role of the C2C resale platform (CRP) in the marketplace. However, existing literature suggests that enterprises should discourage consumers from purchasing on CRPs, as these platforms expose enterprises to direct competition and cannibalize new-product demand. In addition, the lack of exploration into the product and consumer characteristics specific to the C2C resale market makes it challenging to provide clear theoretical guidance for business practices. Therefore, addressing the gap between theoretical research and practical businesses regarding the prevalence of C2C resale markets is essential. This thesis analytically develops a series of two-period game-theoretical models to investigate the optimal dynamic pricing strategy for new products. We explore how product and consumer characteristics in the C2C resale market influence the transactions of new and used products. Additionally, we examine the impacts of the C2C resale market on enterprises, consumers, platforms, society and the environment. The objective is to tackle the operational challenges that C2C resale markets pose to enterprises within the supply chain and to optimize their marketing strategies. The innovative contributions, primary findings, and managerial implications of this thesis are as follows: 1. This study proposes the optimal dynamic pricing strategy for new products considering product characteristic in the presence of C2C resale markets. We demonstrate that the C2C resale market leads to an expansion in total new-product demand. Moreover, we identify the conditions under which retailers can profit from C2C resale transactions and clarify how C2C resale markets negatively affect the environment. The findings are as follows: (a) The intertemporal price discrimination adopted by retailers for new products is influenced by the extent of heterogeneity in used products. When the heterogeneity of used products is high, retailers tend to exacerbate intertemporal price discrimination; (b) The existence of C2C resale transactions results in an increase in the total demand for new products, referred to as the demand-expansion effect. The demand-expansion effect aggravates the environmental impact brought by C2C resale markets, counteracting the original intention of creating an efficient and sustainable consumption mode to eliminate negative environmental impacts; (c) Retailers can benefit when consumers perceive certain discrepancies in the values of new and used products, whereas they may experience revenue loss if the CRP charges a high commission rate; (d) The availability of the disposal option with positive salvage value causes the retailer to benefit less from CRP, due to the competition between the disposal channel and the C2C resale channel for consumers to deal with used products. Contrasting with extant literature, our research incorporates consumers' heterogeneities in their valuations of both new and used products. We emphasize the relationship between secondhand product heterogeneity and intertemporal price discrimination for new products. The result suggests that enterprises can profit from managing new-product selling over periods in parallel to support used-product transactions on CRPs, rather than competing with the platform for demand. Additionally, we find that enterprises can exacerbate intertemporal price discrimination for new products to encourage consumers' strategic waiting in the presence of C2C resale markets. These findings enrich the literature on optimal dynamic pricing strategy for new products by offering novel insights. 2. This study proposes the optimal dynamic pricing strategy for new products considering consumers' utility dependence in the presence of C2C resale markets. We reveal the impact of consumers' utility dependence in shaping market segmentation. Moreover, we identify the conditions under which CRPs can create a win-win situation for all market participants. We also provide theoretical guidance for retailers on collaborating with CRPs. Utility dependence refers to an additional utility experienced by consumers due to their reliance on retailers' products. It may lead consumers to repurchase new products from retailers after ridding of their used items on CRPs. The findings are as follows: (a) As a result of enhanced demand management, consumers' utility dependence mitigates the direct competition posed by CRPs to retailers. By leveraging the heterogeneities in consumers' utility dependence and perceived quality levels of used products, retailers can effectively exacerbate intertemporal price discrimination. This pricing strategy allows retailers to alternate and balance the demands for new and used products, producing an enhancement effect and a cannibalization effect on revenue; (b) Retailers and consumers are likely to either benefit or get worse simultaneously from the rise of the C2C resale market, thus to have aligned preferences over the establishment of this new market entity. Whenever both retailers and consumers are better off, the commission revenue reaped by CRPs strengthens the gain in social welfare, leading to a win-win situation for all market participants. Additionally, the rise of CRP is more likely to benefit the society than individual consumers and the retailer; (c) Retailers can benefit from self-managing a CRP when the marginal operating cost is low. However, offering price discounts to consumers who participate in C2C resale transactions is not an efficient revenue-enhancement strategy, as it reduces new product sales and negatively affects retailers' revenue. Contrasting with extant literature, this study uncovers the strategic role of consumers' utility dependence in the context of C2C resale markets. We clarify the intricate impacts of C2C resale markets on consumers, enterprises, platforms, and society. Our work contributes to the literature on secondary markets by conducting a comprehensive investigation into the C2C mode and providing theoretical guidance for enterprises on adjusting prices in response to consumers' utility dependence. 3. This study proposes the optimal dynamic pricing strategy for new products considering consumers' time inconsistency in the presence of C2C resale markets. We construct a dynamic pricing model that incorporates consumers' time-inconsistent behavior and sequential product upgrades. Moreover, we examine the impacts of time inconsistency on the demands for both new and used products across periods. We also identify an assistant effect and a deterrent effect brought by consumers' time inconsistency on the optimal release strategy for product upgrades by manufacturers in the existence of C2C resale markets. Consumers' time-inconsistency arises from the temporal disparity between immediate payments and delayed payoffs, leading to misestimations of their intertemporal utilities. The findings are as follows: (a) Despite consumers' time-inconsistent behavior may intensify the competition brought by CRPs, manufacturers can still profit by leveraging C2C resale markets to alleviate the negative impact of consumers' misestimation of intertemporal utilities; (b) The presence of time inconsistency generates three distinct demand effects on market segmentation: demand vanishing, demand expansion, and demand migration; (c) Manufacturers need to carefully evaluate the differentiation level between product versions to determine whether to release the upgraded version. Specifically, if the upgraded version closely resembles the original version in experiential features, manufacturers can profit from releasing product upgrades in the existence of time inconsistency. Contrasting with extant literature, this research incorporates consumers' time-inconsistent behavior into the theoretical framework of C2C resale markets. Our results emphasize the significant impacts of time inconsistency on enterprises' dynamic pricing strategy for new products and optimal release strategy for product upgrades in the presence of C2C resale markets. The findings offer valuable insights for enterprises to strategically navigate their decisions in response to the challenges posed by consumers' time inconsistency. |
| Rights: | All rights reserved |
| Access: | open access |
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