When a Strategy for Sustainability is Sustainable: The Impact of Refurbished Products in Markets with Network Effects and Standards Competition (CEIBS Working Paper, No. 017/2020/MKT, 2020)

While introducing refurbished products has become a prevalent practice for sustainability, little is known about whether and when such an environmentally sustainable strategy is sustainable (i.e., profitable) for manufacturers. Given the fact that refurbished products are remanufactured from product returns, introducing refurbished products can create a negative connotation of poor product quality, thereby imposing challenges on the corresponding brand-new products. The authors conduct an empirical study and four experimental studies to investigate the conditions under which introducing refurbished products increases or decreases consumers’ purchase intentions and valuations of the brand-new counterparts in markets with network effects and standards competition. These studies consistently reveal that the availability of refurbished products can positively affect consumers’ evaluations of brand-new products that employ a new technology standard, given that the sales of refurbished products increase the installed user base of the new technology standard and lead to strong positive network effects. However, for products that employ an established standard, these studies show that introducing refurbished products reduces consumers’ purchase intentions and valuations of the brand-new counterparts. These findings provide important implications for this green product strategy.