How Do Consumers Choose between Multiple Product Generations and Conditions? An Empirical Study of iPad Sales on eBay

Abstract

Many companies are reluctant to enter the remanufacturing market because of concern with cannibalization of new sales, competition from current remanufacturers, and the willingness of consumers to purchase remanufactured products. What is often missing, however, is an in‐depth understanding of how consumers make complex purchase decisions involving remanufactured items among numerous other options. This study examines how consumers evaluate remanufactured products when there are multiple conditions and generations of the item available, and evaluates the risk that remanufactured products pose to new product sales. We leverage transaction data of iPad sales from eBay and structural estimation techniques developed in the industrial organization literature to conduct our analysis. We find that product generation, condition, and seller attributes are all highly influential in shaping consumers’ purchasing decisions and that the relationship between new and remanufactured products is much more nuanced and context‐specific than previously shown. Counter to industry intuition, we find that remanufactured products pose the same amount of threat to new‐condition goods as do used goods. Through these and other findings, we provide insights on how CLSC participants and those exploring entry into the remanufacturing business may achieve more profitable remanufacturing strategies.