January 28, 2022

Right to Repair: Pricing, Welfare, and Environmental Implications

10:00 AM - 11:30 AM

Virtual Zoom

Area: Operations and Decision Technologies

Host: Associate Professor John Turner

Speaker: Luyi Yang, Assistant Professor of Operations & IT Management

University: University of California, Berkeley, Haas School of Business

Title: Right to Repair: Pricing, Welfare, and Environmental Implications

The "right to repair" (RTR) movement calls for government legislation that requires manufacturers to provide repair information, tools, and parts so that consumers can independently repair their own products with more ease. The initiative has gained global traction in recent years. Repair advocates argue that such legislation would break manufacturers’ monopoly on the repair market and benefit consumers. They further contend that it would reduce the environmental impact by reducing e-waste and new production. Yet, the RTR legislation may also trigger a price response in the product market as manufacturers try to mitigate the profit loss. This paper employs an analytical model to study the pricing, welfare, and environmental implications of RTR. We find that as the RTR legislation continually lowers the independent repair cost, manufacturers may initially cut the new product price and then raise it. This non-monotone price adjustment may further induce a non-monotone change in consumer surplus, social welfare, and environmental impact. Strikingly, the RTR legislation can potentially lead to a "lose-lose-lose" outcome that compromises manufacturer profit, reduces consumer surplus, and increases the environmental impact, despite repair being made easier and more affordable.