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| Arastou Khatibi and Tanguy Isaac |
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| ''Making products last: Sales versus renting'' |
| ( 2026, Vol. 0 No.0 ) |
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| We compare product durability and profitability under sales and renting when product quality is unobservable to consumers. Ownership structure determines who bears the consequences of product failure and thereby shapes incentives to enhance durability. Under sales, consumers invest in maintenance, while firms have no incentive to invest in quality and may benefit from replacement sales following failure. Under renting, consumers exert no maintenance effort, while firms invest in quality because they internalize repair and replacement costs. We show that sales generates greater durability when consumer maintenance is relatively more effective, whereas renting can generate greater durability when firm quality investment is relatively more effective and replacement costs are sufficiently high. Profitability follows a different pattern, so the more profitable business model need not be the more durable one. Extensions with deductibles and complementary durability inputs further highlight the role of failure-risk allocation in shaping durability incentives. |
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| Keywords: |
JEL: L1 - Market Structure, Firm Strategy, and Market Performance: General
D8 - Information, Knowledge, and Uncertainty: General |
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| Manuscript Received : Oct 12 2026 | | Manuscript Accepted : Oct 12 2026 |
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