Strategic Durability with Sharing Markets

Abstract

Electronic sharing markets are contributing to a paradigm shift, from consuming products to accessing products. This paper studies the effects of sharing markets on the prices for new products and on product design in terms of durability. In a dynamic economy with overlapping generations, consumers take strategic purchasing decisions, anticipated by a durable-goods monopolist. Without sharing, the optimal durability increases in the production cost. For low-cost products, a producer prefers to limit durability, effectively disabling a secondary sharing market. The presence of sharing never decreases the incentives to provide durability thus contributing to sustainable product design.

Keywords: Collaborative Consumption, Durability, Peer-to-peer Markets, Planned Obsolescence, Sharing Economy

JEL Classification: C72, D11, D23, D61