Business Model Choice under Right-to-Repair: Economic and Environmental Consequences

Abstract

Right-to-Repair (RTR) regulations require producers to design easy-to-repair products and supply necessary information and parts for consumers to independently undertake repairs. While these regulations aim to prolong product lifetimes through repairs, increase secondhand use, and reduce waste; the ease of access to proprietary information and spare parts can have unintended consequences. For example, they may facilitate cloning by third parties. The increased risk of cloning under RTR may, in turn, encourage producers to reconsider their business model choices between ownership and non-ownership models (e.g. leasing). In this paper, we analyze the effect of RTR on business model choice, and the implications for producers, consumers, and the environment. We identify the conditions under which RTR may motivate producers to retain ownership of products and bear responsibility for repairs to avoid competition from secondary markets and third-party clones. We find that RTR regulations may indeed lead to a lower environmental impact for some products. However, for a wide range of product types, these regulations may result in a “lose-lose" situation for producers and the environment, while also decreasing consumer surplus and potentially curtailing producers' incentives to innovate.

Keywords: Right to Repair, Circular Economy, Leasing, Selling, Ownership, Circular Business Models