In this paper, we investigate whether and how the presence of remanufactured products and the identity of the remanufacturer influence the perceived value of new products through a series of behavioral experiments. Our results demonstrate that the presence of products remanufactured and sold by the Original Equipment Manufacturer (OEM) can reduce the perceived value of new products by up to 8%. However, the presence of third-party remanufactured products can increase the perceived value of new products by up to 7%. These results suggest that deterring third-party competition via preemptive remanufacturing may reduce profits, while the presence of third-party competition may actually be beneficial for an OEM.

Based on the proposition that leasing is environmentally superior to selling, some firms have adopted a leasing strategy and others promote their existing leasing programs as environmentally superior to “green” their image. The argument is that because a leasing firm retains ownership of the off-lease units, it has an incentive to remarket them or invest in designing a more durable product, resulting in a lower volume of new production and disposal. However, leasing might be environmentally inferior because of the direct control the firm has over the off-lease products, which may prompt the firm to remove them from the market to avoid cannibalizing the demand for new products. Motivated by these issues, we adopt a life-cycle environmental impact perspective and analytically investigate if leasing can be both more profitable and have a lower total environmental impact. We find that leasing can be environmentally worse despite remarketing all off-lease products and greener than selling despite the mid-life removal of off-lease products. Our analysis also provides insights for environmental groups and entities that use different approaches to improve the environmental performance of business practices. We show that imposing disposal fees or encouraging remanufacturing, under some conditions, can actually lead to higher environmental impact. We also identify when educating consumers to be more environmentally conscious can improve the relative environmental performance of leasing. This paper was accepted by J. Miguel Villas-Boas, marketing.

It has been argued that servicizing business models, under which a firm sells the use of a product rather than the product itself, are environmentally beneficial. The main arguments are as follow. First, under servicizing the firm charges customers based on the product usage. Second, the quantity of products required to meet customer needs may be smaller because the firm may be able to pool customer needs. Third, the firm may have an incentive to offer products with higher efficiency. Motivated by these arguments, we investigate the economic and environmental potential of servicizing business models. We endogenize the firm’s choice between a pure sales model, a pure servicizing model, and a hybrid model with both sales and servicizing options; the pricing decisions; and the resulting customer usage. We consider two extremes of pooling efficacy, i.e., no pooling versus strong pooling. We find that under no pooling servicizing leads to higher environmental impact due to production but lower environmental impact due to use. In contrast, under strong pooling, when a hybrid business model is more profitable, it is also environmentally superior. However, a pure servicizing model is environmentally inferior for high production costs because it leads to a larger production quantity even under strong pooling. We also examine the product efficiency choice and find that the firm offers higher efficiency products only under servicizing models with strong pooling. This paper was accepted by Serguei Netessine, operations management.

Operations management (OM) research has made several important contributions to environmental sustainability over the last two decades. In this article, we point to a new opportunity on the horizon—the circular economy movement, which is gaining significant traction in practice. We introduce the concept and highlight the building blocks behind it. We also explain why this trend in practice can provide an opportunity for the OM community. To do so, we describe four companies that have been positioned as prime examples of implementing the circular economy concept and discuss the operational challenges faced by them. We draw on them to identify several promising and open questions for OM research and explain why an operations perspective is critical in this context.

I n this paper, we investigate whether and how the presence of remanufactured products and the identity of the remanufacturer influence the perceived value of new products through a series of behavioral experiments. Our results demonstrate that the presence of products remanufactured and sold by the original equipment manufacturer (OEM) can reduce the perceived value of new products by up to 8%. However, the presence of thirdparty-remanufactured products can increase the perceived value of new products by up to 7%. These results suggest that deterring third-party competition via preemptive remanufacturing may reduce profits, whereas the presence of third-party competition may actually be beneficial for an OEM.