Peer-to-peer product sharing: Implications for ownership, usage, and social welfare in the sharing economy

Saif Benjaafar, Guangwen Kong, Xiang Li, Costas Courcoubetis

Research output: Contribution to journalArticlepeer-review

98 Scopus citations

Abstract

We describe an equilibrium model of peer-to-peer product sharing, or collaborative consumption, where individuals with varying usage levels make decisions about whether or not to own a homogeneous product. Owners are able to generate income from renting their products to nonowners while nonowners are able to access these products through renting on an as-needed basis. We characterize equilibrium outcomes, including ownership and usage levels, consumer surplus, and social welfare.We compare each outcome in systems with and without collaborative consumption and examine the impact of various problem parameters. Our findings indicate that collaborative consumption can result in either lower or higher ownership and usage levels, with higher ownership and usage levels more likely when the cost of ownership is high. Our findings also indicate that consumers always benefit from collaborative consumption, with individuals who, in the absence of collaborative consumption, are indifferent between owning and not owning benefitting the most. We study both profit-maximizing and social-welfare- maximizing platforms and compare equilibrium outcomes under both in terms of ownership, usage, and social welfare. We find that the difference in social welfare between the profit-maximizing and social-welfare-maximizing platforms is relatively modest.

Original languageEnglish (US)
Pages (from-to)477-493
Number of pages17
JournalManagement Science
Volume65
Issue number2
DOIs
StatePublished - Feb 2019

Bibliographical note

Funding Information:
History: Accepted by Gad Allon, operations management. Funding: This research was in part funded by grants from the University of Minnesota Initiative on the Sharing Economy and the Center for Transportation Studies and the Singapore Ministry for Education. SupplementalMaterial: The online appendix is available at https://doi.org/10.1287/mnsc.2017.2970.

Publisher Copyright:
© 2019 by the American Society of Nephrology.

Copyright:
Copyright 2019 Elsevier B.V., All rights reserved.

Keywords

  • Collaborative consumption
  • On-demand platforms
  • Peer-to-peer markets
  • Sharing economy
  • Social welfare
  • Sustainability

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