Strategic Product Line Design for Manufacturers in Competitive Sharing Markets

In the fiercely competitive sharing market, manufacturers have launched product sharing/leasing services through business-to-customer (B2C) and peer-to-peer (P2P) platforms. To reduce the channel conflicts caused by product sharing, manufacturers expand product lines by renting products of different quality on their B2C platform. In this paper, we investigate the product lines in a vertically differentiated duopoly. We examine competing manufacturers’ three product line strategies: the no-product line strategy, the high-end product line strategy, and the low-end product line strategy. We characterize the equilibrium outcomes under these strategies and investigate the manufacturers’ preferences regarding these strategies. Our findings reveal a unique equilibrium: the high-quality manufacturer prefers offering a high-end product line, while the low-quality manufacturer opts for a low-end product line. This configuration leverages each firm’s comparative advantage, mitigates channel conflict, reduces cannibalization, and supports effective market segmentation. The equilibrium leads to a Pareto improvement and enhances operational efficiency for both firms. These results suggest that aligning product line design with intrinsic product quality can balance profitability and market efficiency in shared markets.