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| Date | Time | Room | Speaker | Affiliation | Paper |
|---|---|---|---|---|---|
| September 20 | 9:30 AM | 3325 Graigner Hall | Chris Ryan | Booth School, University of Chicago | |
| October 26 | 9:30 AM | 3560 Grainger Hall | Hillol Bala | Kelley School, Indiana University | TBD |
| October 29 | 9:30 AM | 3560 Grainger Hall | Kostas Nikolopoulos | Bangor UniversityTBD | Looking for the Needle in the Haystack: |
| OIM Research Workshop | |||||
| December 5-6 | Edieal Pinker | Yale School of Management, Yale University | TBD | ||
| December 5-6 | Atalay Atasu | Scheller College of Business, Georgia Tech | |||
| December 5-6 | Jan Van Mieghem | Kellogg School, Northwestern University | TBD | ||
| March 15 | 9:30 AM | Beril Toktay | Scheller College of Business, Georgia Tech | TBD | |
| April 5 | 9:30 AM | Kumar Rajaram | Anderson School, UCLA | TBD | |
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Prof. Edieal Pinker, Professor, Yale School of Management, Yale University
Prof. Ataly Atasu, Professor, Scheller College of Business, Georgia Tech
The circular economy (CE) movement has been gaining momentum as a promising solution to the environmental problems we are facing today. Promoted by non-profits such as the Ellen MacArthur Foundation and supported by major consulting companies (e.g., by McKinsey and Accenture), the CE is widely discussed in academic, industry and policy-making circles. A case in point is the recent CE pledge form multinationals (such as HP, Dell, Philips and Cisco) in the last World Economic Forum event in Davos.
The CE hinges on the idea that smart product and business model designs that close material and energy loops will help achieve not only environmental sustainability but also better economic outcomes. We test this influential premise in the context of modular product architectures and leasing, two prominent and frequently discussed elements of a circular economy implementation. The proponents of CE view these two strategies as complementary, reinforcing each other's beneficial effects especially on firm profits and the environment. A well-known case in point is Xerox, who has long leased products with modular product architectures as part of a successful business model, and claimed significant environmental benefits from its implementation. However, the joint execution of leasing and selling is not as prevalent in other industries or firms. Our interactions with a multinational asset-management company further suggest that many firms need guidance as to when and to what extent leasing modular products can be a profitable business strategy and beneficial for the environment.
To this end, observing that most product categories that fit into this discussion are durables, we formulate an analytical model that builds on the durable goods literature and extends it to analyze the impact of a modular product architecture under leasing. We find that leasing and modular product architectures are typically substitutes from a firm profit point of view. Leasing modular products is profitable only when (i) off-lease products are in much better condition than used products that have been sold; (ii) replacing product modules to offer blended products with used and new modules is economical for the firm; and (iii) product modules substantially differ with respect to their durability. We demonstrate the practicality of these results by a number of examples based on our interactions with the asset-management company. Regarding the environmental implications of leasing modular products, we find that they benefit the environment only in a relatively limited set of conditions, which are neither immediate nor intuitive.
The main take-away from this paper is that for all the talk on the potential of the circular economy, there is a lot to be done to test and verify its broad, sweeping claims, and much of this needs an academic perspective.
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