Peer-to-Peer Product Sharing: Implications for Ownership, Usage and Social Welfare in the Sharing Economy

74 Pages Posted: 6 Oct 2015  

Saif Benjaafar

University of Minnesota - Industrial & System Engineering

Guangwen Kong

University of Minnesota - Industrial & System Engineering

Xiang Li

University of Minnesota - Industrial & System Engineering

Costas Courcoubetis

Singapore University of Technology and Design (SUTD)

Date Written: October 5, 2015

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. Owners are able to generate income from renting their products to non-owners while non-owners are able to access these products through renting on 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 including rental price, platform's commission fee, cost of ownership, owner's moral hazard cost, and renter's inconvenience cost. Our findings indicate that, depending on the rental price, 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. We show that consumers always benefit from collaborative consumption, with individuals who, in the absence of collaborative consumption, are indifferent between owning and not owning benefiting the most. We also show that the platform's profit is not monotonic in the cost of ownership, implying that a platform is least profitable when the cost of ownership is either very high or very low.

Keywords: sharing economy, collaborative consumption, two-sided markets, social welfare, sustainability

Suggested Citation

Benjaafar, Saif and Kong, Guangwen and Li, Xiang and Courcoubetis, Costas, Peer-to-Peer Product Sharing: Implications for Ownership, Usage and Social Welfare in the Sharing Economy (October 5, 2015). Available at SSRN: https://ssrn.com/abstract=2669823 or http://dx.doi.org/10.2139/ssrn.2669823

Saif Benjaafar

University of Minnesota - Industrial & System Engineering ( email )

111 Church Street S.E.
Minneapolis, MN 55455
United States

Guangwen Kong (Contact Author)

University of Minnesota - Industrial & System Engineering ( email )

111 Church Street S.E.
Minneapolis, MN 55455
United States

Xiang Li

University of Minnesota - Industrial & System Engineering ( email )

111 Church Street S.E.
Minneapolis, MN 55455
United States

Costas Courcoubetis

Singapore University of Technology and Design (SUTD) ( email )

20 Dover Drive
Singapore, 138682
Singapore

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