Product Line Expansion for Quality Differentiated Manufacturers considering Product Sharing

In supply chain management, product line expansion is the core operation method of traditional manufacturers. In the sharing market, to eliminate the negative impact of product sharing, manufacturers expand the product line to attract consumers by providing rental products (lower quality than retail products). We study whether quality differentiated manufacturers will expand the product line. The results show that the low-quality manufacturer will expand the product line and whether the high-quality manufacturer expands the product line will be affected by quality differentiation. When the quality difference between retail products and the quality difference between retail products and rental products are low, the high-quality manufacturer expands the product line; otherwise, it does not expand the product line. Furthermore, compared to manufacturers not expanding the product line, the equilibrium leads to a Pareto improvement. When both manufacturers expand the product line, they will gain more profits. When only the low-quality manufacturer expands its product line, the low-quality manufacturer gains more profit and the high-quality manufacturer’s profit remain unchanged.