Collaborative Consumption: Strategic and Economic Implications of Product Sharing

Management Science, 2016, Forthcoming

64 Pages Posted: 9 Feb 2015 Last revised: 5 Oct 2017

See all articles by Baojun Jiang

Baojun Jiang

Washington University in Saint Louis - John M. Olin Business School

Lin Tian

Fudan University, School of Management

Date Written: August 2, 2016

Abstract

Recent technological advances in online and mobile communications have enabled collaborative consumption or product sharing among consumers on a massive scale. Collaborative consumption has emerged as a major trend as the global economic recession and social concerns about consumption sustainability lead consumers and society as a whole to explore more efficient use of resources and products. We develop an analytical framework to examine the strategic and economic impact of product sharing among consumers. A consumer who purchased a firm’s product can derive different usage values across different usage periods. In a period with low self-use value, the consumer may generate some income by renting out her purchased product through a third-party sharing platform as long as the rental fee net of transaction costs exceeds her own self-use value. Our analysis shows that transaction costs in the sharing market have a non-monotonic effect on the firm’s profits, consumer surplus, and social welfare. We find that when the firm strategically chooses its retail price, consumers’ sharing of products with high marginal costs is win-win for the firm and the consumers whereas their sharing of products with low marginal costs can be lose-lose. Further, in the presence of the sharing market, the firm will find it optimal to strategically increase its quality, leading to higher profits but lower consumer surplus.

Keywords: collaborative consumption; product sharing; sharing economy; consumer-to-consumer; peer-to-peer; moral hazard; pricing; quality; platform; analytic models

Suggested Citation

Jiang, Baojun and Tian, Lin, Collaborative Consumption: Strategic and Economic Implications of Product Sharing (August 2, 2016). Management Science, 2016, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2561907 or http://dx.doi.org/10.2139/ssrn.2561907

Baojun Jiang (Contact Author)

Washington University in Saint Louis - John M. Olin Business School ( email )

One Brookings Drive
Campus Box 1156
St. Louis, MO 63130-4899
United States
3149353315 (Phone)

HOME PAGE: http://apps.olin.wustl.edu/faculty/Jiang/

Lin Tian

Fudan University, School of Management ( email )

670 Guoshun Road, Yangpu District
Shanghai, 200433
China

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