Abstract

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. In the presence of sharing, a producer prefers to limit durability for low-cost products, effectively disabling a secondary sharing market. However, all else equal, a peer-to-peer economy never decreases the incentives to provide durability.

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