ORCIBS Seminar - Özgen Karaer

In this talk we will be discussing a monopolist manufacturer's performance under servitization compared to selling. Servitization is the activity of selling the services provided by the product rather than the product itself. It is a business model that might be environmentally superior to conventional selling. Servitization promises accessibility to the product’s functionality, pooling of consumer use, and potentially products of better design. However, it can also inflate consumption and result in a bigger environmental impact overall. In this paper, we compare servitization with traditional selling for a monopolist durable goods manufacturer from both an economic and environmental perspective. In this comparison, we define the durability of a product as the use capacity; that is, how many usages it can endure before reaching end of life. We study the firm’s durability decision, followed by the price/fee decision, and the consequent usage in the market under each model.