Reputation or warranty, what is more effective against planned obsolescence?

Richard F. Hartl, Peter M. Kort, Stefan Wrzaczek

Veröffentlichungen: Beitrag in FachzeitschriftArtikelPeer Reviewed

Abstract

In determining the durability of its product a firm faces a trade off. Performing a policy of planned obsolescence by making their products less durable implies that the consumer needs to replace them earlier, which thus enhances demand. However, a lower quality of the product will result in a lower reputation, which in turn will affect demand negatively. In many cases, the government protects the consumer by implementing a warranty period. Our paper studies how a firm should optimally deal with this trade off and react to government policy. We obtain the following results. First, we find that the length of the warranty period has an inverted U-shaped effect on the product life time. Second, if more consumers are aware of the existence of a warranty period and ask for a free product replacement, this will increase the product life time. Third, increasing uncertainty about the breakdown of the product also has an inverted U-shaped effect on the product lifetime.
OriginalspracheEnglisch
Seiten (von - bis)939-954
Seitenumfang16
FachzeitschriftInternational Journal of Production Research
Jahrgang61
Ausgabenummer3
Frühes Online-Datum10 Jan. 2022
DOIs
PublikationsstatusVeröffentlicht - 2023

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