An Economic Analysis of "Right to Repair" in Pricing, Profit, Welfare, and Environmental Impact
COM2 Level 4
Executive Classroom, COM2-04-02
Examiners: Associate Professor Hahn Jungpil and Assistant Professor Zhai Yingda
Abstract:
The "right to repair" movement appeals for legislation that requires manufacturers to share repair information (e.g., manuals, schematics, documentation), auxiliary tools (e.g., diagnostic tools) and parts of products so as to make it easier for consumers to fix their products on their own. As of now, the movement has gained support from individual consumers, independent repair service providers and other organizations such as the US Public Interest Research Group. Given the global attention on it, one of the burning issues is to solve the contentious debate about "right to repair". The advocates argue that "right to repair" can break the monopoly of manufacturers in repair service so that the price for repair would drop and thereby benefit consumers more. Moreover, associating with the increasingly serious e-waste problem, the advocates believe that consumers empowered by the "right to repair" legislation would dump and buy fewer products, which helps to reduce the environmental impact. However, many manufacturers contend that this act would hurt their bottom line and thereby lobby against it. To clarify these claims, this paper uses an analytical model to examine the impact of "right to repair" on consumer surplus, firm profit, social welfare, and environmental impact. We identify three effects of "right to repair": (1) manufacturers may abandon the repair service market; (2) it cannibalizes the replacement sales of products; (3) repair service can increase the expected valuation of consumers to the product when they are buying new products. Different from advocates' claims, we find that "right to repair" may improve manufacturers' profit when the production cost is high and may lower consumer surplus if the performance of repair service is good. Even though "right to repair", partly as expected, hurts manufacturer and benefits consumers in some condition, our analysis shows that it rarely benefits the environment any longer in the same condition. However, we also find that "right to repair" can create a "Win-Win-Win" or "Lose-Lose-Lose" situation under the right condition. Thus, legislatures need to conduct case-by-case examination about the pros and cons of "right to repair" under different product and repair fields.