Abstract for:Is Sharing More Sustainable? New Product Sales During the Transition from Low- to High- Product Utilization
On-demand platforms that enable the sharing of products such as automobiles, clothing, and sporting equipment have grown rapidly in recent years, seeking to create value by increasing the utilization of these expensive and durable assets, and allowing consumers to only pay for what they use, which some have viewed as a more-sustainable alternative to our increasingly consumerist society. Others are more skeptical, suggesting that these platforms merely reduce barriers to consumption, enabling products to be consumed more easily. Is sharing more sustainable? In this paper, we develop a formal model of the adoption of shared product use, analyzing the impact on the size of the product installed base, and the rate of new product sales. We show that while increasing the rate of product utilization reduces the size of the installed base needed to serve users, the rate of new product sales does not fall proportionally if product life is defined by use, because products that are used more intensively wear out more quickly. Important transitional dynamics exist also, with the potential for a temporary dip in sales, or a temporary surge, depending on how the shared-use market emerges, meaning that firms prone to superstitious learning may be easily misled.