The growing “right-to-repair” legislative movement seeks to make it easier and cheaper for consumers to fix their products by requiring manufacturers to share repair information, provide diagnostic tools, and supply service parts. Various right-to-repair laws have been considered and passed around the world. In Europe, manufacturers are legally required to supply spare parts for up to 10 years. In the U.S.
The key is that manufacturers might strategically adjust new product prices to mitigate their foreseeable profit loss from the right-to-repair legislation. Will manufacturers follow a margin strategy and raise new product prices to capitalize on easier repair? Will manufacturers follow a volume strategy and cut new product prices to lure consumers into replacing instead of repairing a glitchy product? Such price responses can have nuanced implications for both consumers and the environment.
It turns out that how manufacturers respond depends crucially on how much it costs to produce the product in question. In the market for products that are relatively cheap to make — for example, smartphones and microwaves — our model predicts that a right-to-repair bill will likely see manufacturers lower new product prices and flood the market. This reduces the appeal of repair because consumers would rather buy a brand-new product at a low price than fix a used product.
In instances where production costs are intermediate, our model predicts that the outcome is a combination of the above effects. When the right-to-repair legislation is introduced, independent repair costs start to fall, and manufacturers are likely to lower the prices of their new products in order to entice customers away from the repair option . However, a continual price cut would eventually leave the profit margin too thin.
For some strong disagreement on the rationale given here, see doctorow's comments:
neakmenter may be of interest? HBR are usually very out of date in my mind but this one might raise some interesting questions ?