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Servicizing as an alternative to selling for a durable goods manufacturer

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2019
Kanatlı, Mehmet Ali
Servicizing is the activity of selling the services provided by the product rather than the product itself. It has been considered as an alternative business model that might be environmentally superior to the conventional selling business model. Servicizing promises pooling of consumer use and products with higher durability. However, it can also inflate demand/consumption and result in a bigger environmental impact overall. This thesis compares selling and servicizing business models for a monopolist durable-goods manufacturer. Durability and price decisions of the firm, and usage level decisions of consumers are modeled as endogenous. Under this setting, we compare the profitability and environmental performance of the two business models. We find that servicizing business model leads to more durable product design. We identify the conditions which enable servicizing to be superior regarding profitability and environmental impact.