Implications of Product Lifecycle and Channel Structure upon Optimal Investment in Durability
Publication Date
6-1-2007
Abstract
We explore the interactions between channel structure and mode of operations (leasing versus selling) and their implications for a manufacturer's willingness to invest in making her product more durable. Using a centralized manufacturer who leases her product as a point of reference, we find that an isolated change in either the channel structure (centralized to decentralized), or the operational mode (leasing to selling) can decrease the manufacturer's willingness to provide durability. However, if combined, these two changes together may strengthen the manufacturer's willingness to invest in durability. Consequently, a manufacturer who sells through an intermediary may invest more in durability than one who leases directly to end consumers.
Document Type
Article
Keywords
durable goods, channel structure, competition
Disciplines
Business Administration, Management, and Operations
DOI
10.2139/ssrn.4507116
Source
SMU Cox: IT & Operations Management (Topic)
Language
English
