Owning, Using and Renting: Some Simple Economics of the 'Sharing Economy'

43 Pages Posted: 14 Mar 2016

See all articles by John J. Horton

John J. Horton

New York University (NYU) - Department of Information, Operations, and Management Sciences

Richard J. Zeckhauser

Harvard University - Harvard Kennedy School (HKS); National Bureau of Economic Research (NBER)

Date Written: February 12, 2016

Abstract

New Internet-based markets enable consumer/owners to rent out their durable goods when not using them. Such markets are modeled to determine ownership, rental rates, quantities, and surplus generated. Both the short run, before consumers can revise their ownership decisions, and the long run, in which they can, are examined to assess how these markets change ownership and consumption. The analysis examines bringing-to-market costs, such as labor costs and transaction costs, and considers the operating platform’s pricing problem. A survey of consumers broadly supports the modeling assumptions employed. For example, ownership is determined by individuals’ forward-looking assessments of planned usage.

Keywords: Sharing economy, peer-to-peer markets, rentals, Airbnb, Uber, bringing-to-market costs, transaction costs

JEL Classification: L1, D23, D47

Suggested Citation

Horton, John J. and Zeckhauser, Richard J., Owning, Using and Renting: Some Simple Economics of the 'Sharing Economy' (February 12, 2016). HKS Working Paper No. RWP16-007, Available at SSRN: https://ssrn.com/abstract=2746197 or http://dx.doi.org/10.2139/ssrn.2746197

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Richard J. Zeckhauser

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