Collaborative Consumption: Strategic and Economic Implications of Product Sharing

TLDR

Online/mobile technology has enabled large‑scale product sharing, a trend driven by economic recession and sustainability concerns that push consumers toward more efficient resource use. The study develops an analytical framework to assess the strategic and economic effects of consumer product sharing. The framework models a consumer renting out a product when the net rental fee exceeds self‑use value, taking transaction costs into account. Analysis shows that transaction costs have a nonmonotonic impact on firm profits, consumer surplus, and welfare; high‑marginal‑cost product sharing benefits both firm and consumers, while low‑marginal‑cost sharing harms both, and the presence of sharing prompts firms to raise quality, boosting profits but reducing consumer surplus. The paper was accepted by J.

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 nonmonotonic 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 a win-win situation for the firm and the consumers, whereas their sharing of products with low marginal costs can be a lose-lose situation. Furthermore, 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. This paper was accepted by J. Miguel Villas-Boas, marketing.