Vertical integration of an online secondhand platform and a recycling platform under different power structures

This work considers the vertical integration of a recycling platform and an online secondhand platform, called the recycling-secondhand platform (RSP), in a supply chain composed of the RSP and an online retail platform. The three market power structures considered are those where the online retail platform dominates the market, the online secondhand and the online retail platforms have equal power, and the online secondhand platform dominates the market, while the recycling platform is the all-time leader without the RSP integration. Game models are used to analyze the problem and backward induction is used to obtain equilibrium solutions. The influences of the relevant parameters on the prices, demands and profits of the supply chain and its members, and on the consumer surplus, are analyzed. The theoretical results are verified through numerical analyses and corresponding managerial insights and suggestions are provided. The results show that the RSP does not necessarily benefit from its integration. When the online retail platform dominates the market, the integration can improve the RSP profit only when the consumer acceptance of the reusable products is low. The RSP integration always benefits the RSP when the power of the online secondhand platform is at least equal to that of the online retail platform, and always harms the online retail platform, the supply chain and the consumers. The RSP coordination mechanism is discussed in an extension. The extensions also show that only under strict conditions, can the online retail platform enter the secondhand market and integrate with the RSP.