Peer-to-Peer Rental Markets in the Sharing Economy

44 Pages Posted: 8 Mar 2015 Last revised: 7 Oct 2015

Samuel P. Fraiberger

Harvard University - Institute for Quantitative Social Sciences; Northeastern University - Network Science Institute; NYU Stern School of Business - IOMS Department

Arun Sundararajan

New York University (NYU): Stern School of Business and Center for Urban Science+Progress

Date Written: October 6, 2015

Abstract

Will the sharing economy create long-run economic value? We develop a new dynamic model of peer-to-peer Internet-enabled rental markets for durable goods in which consumers may also trade their durable assets in (traditional) secondary markets, transaction costs and depreciation rates may vary with usage intensity, and consumers are heterogeneous in their price sensitivity and asset utilization rates. We characterize the stationary equilibrium of the model. We analyze the welfare and distributional effects of introducing these rental markets by calibrating our model with US automobile industry data and 2 years of transaction-level data we have obtained from Getaround, a large peer-to-peer car rental marketplace. Our counterfactual analyses vary marketplace access levels and matching frictions, showing that peer-to-peer rental markets change the allocation of goods significantly, substituting rental for ownership and lowering used-good prices while increasing consumer surplus. Consumption shifts and economic impact are significantly more pronounced for below-median income users, who also provide a majority of rental supply. Our results also suggest that these below-median income consumers will enjoy a disproportionate fraction of eventual welfare gains from this kind of 'sharing economy' through broader inclusion, higher quality rental-based consumption, and new ownership facilitated by rental supply revenues.

Keywords: sharing economy, electronic markets, social media, durable goods, collaborative economy, on-demand, collaborative consumption, crowdsourcing, crowdfunding, p2p, Internet, ecommerce, Airbnb, Uber, Lyft, Lending Club, Blablacar, WeWork, Instacart, Ola

JEL Classification: D4, L1, L81

Suggested Citation

Fraiberger, Samuel P. and Sundararajan, Arun, Peer-to-Peer Rental Markets in the Sharing Economy (October 6, 2015). NYU Stern School of Business Research Paper. Available at SSRN: https://ssrn.com/abstract=2574337 or http://dx.doi.org/10.2139/ssrn.2574337

Samuel P. Fraiberger

Harvard University - Institute for Quantitative Social Sciences ( email )

1737 Cambridge St
Cambridge, MA 02115
United States

Northeastern University - Network Science Institute ( email )

177 Huntington Avenue
Boston, MA 02115
United States

NYU Stern School of Business - IOMS Department ( email )

New York, NY
United States
6179599809 (Phone)
6179599809 (Fax)

Arun Sundararajan (Contact Author)

New York University (NYU): Stern School of Business and Center for Urban Science+Progress ( email )

44 West 4th Street, KMC 8-90
New York, NY 10012
United States

HOME PAGE: http://oz.stern.nyu.edu/

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