Pricing and product-sharing strategy for quality-differentiated manufacturers in competitive marketplaces

Recently, many manufacturers have introduced product-sharing schemes to increase competitiveness. However, it is unclear how quality-differentiated manufacturers implement their sharing/sales strategies in competitive market. This paper explicitly models the impact of a product’s consumer-side benefits from ownership (CBO) on manufacturers’ choice and examines the pricing issue before and after the platform-building strategy, respectively. We analyse the equilibrium outcomes and compare the results under different scenarios in terms of pricing, manufacturers’ profit, market share, and consumer surplus. Our key takeaways are as follows: First, in contrast to a scenario where both manufacturers only sell products, each manufacturer benefits from the other’s sharing introducing strategy. Second, for the high-quality manufacturer, product sharing is beneficial only when the CBO of its product is relatively large or small. However, for the low-quality manufacturer, it is optimal to offer only product sharing without traditional sales. Third, product sharing in competitive marketplace may lead to higher or lower sale prices, which differ from the result in monopoly marketplace. Finally, sharing is not necessarily beneficial for consumers. However, the high-quality manufacturer introducing the sharing can bring economic benefits to itself and consumers under certain conditions. Our analysis helps competing manufacturers formulate sharing/selling models and pricing policies.