Product sharing among consumers has recently emerged as a major trend as consumers are financially squeezed during the global economic recession and as global concerns on consumption sustainability brings society to explore more efficient use of resources and products.We develop an analytical framework to examine the effects of consumers’ collaborative consumption on a firm’s pricing and quality decisions.The firm sells a durable product to consumers,who may derive use values that differ across multiple usage periods.In a period with low own use value,a consumer may rent out her purchased product in the product-sharing market.Our analysis shows that the firm’s cost and the consumer’s transaction cost for product sharing critically influence the firm’s optimal strategies.The impact of collaborative consumption on firm profits,consumer surplus,and social welfare may be non-monotonic in the transaction cost.If the firm strategically changes both its price and quality,the potential positive effect of collaborative consumption on consumer surplus disappears and the firm will benefit from forward-looking consumers’ collaborative consumption.