Business Models in the Sharing Economy: Manufacturing Durable Goods in the Presence of Peer-to-Peer Rental Markets
TL;DR: This work shows why the best business model depends on whether consumer usage rates vary or not, and finds that when consumer variation in usage rates is intermediate, the manufacturer is surprisingly best off avoiding offering its own direct rentals option and instead, facilitating a peer-to-peer rental market where consumers can share among themselves.
Abstract: With peer-to-peer sharing of durable goods like cars, boats, and condominiums, it is unclear how manufacturers should react. They could seek to encourage these markets or compete against them by of...
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TL;DR: In this article, the authors developed an analytical framework to study how the OEM selects business modes under the sharing economy, including renters' perceived value of shared products and owners' maintenance costs, which depend on the marginal cost of products.
45 citations
TL;DR: In this paper , the authors developed a game model, in which a monopoly manufacturer that can produce gasoline vehicles (GVs) or energy vehicles (EVs) not only sells vehicles in the sales market, but also rents them out in the sharing market by the self-built platform.
Abstract: PurposeThis paper aims to study vehicle-type strategies for the manufacturer's car sharing by accounting for consumers' behavior and the subsidy.Design/methodology/approachThe authors develop a game model, in which a monopoly manufacturer that can produce gasoline vehicles (GVs) or energy vehicles (EVs) not only sells vehicles in the sales market, but also rents them out in the sharing market by the self-built platform. The manufacturer strategically chooses which type of vehicles based on consumers' behavior and whether the government provides the EVs’ subsidy.FindingsWhen consumers' low-carbon awareness is relatively high or the marginal cost is low, the manufacturer chooses EVs. The manufacturer chooses GVs when the low-carbon awareness and the marginal cost are low. Only when the low-carbon awareness and the subsidy are not too low, the manufacturer who originally chose GVs launches EVs. When the low-carbon awareness is high, the excessive subsidy discourages the manufacturer from entering the sharing market. If the government provides the subsidy, the manufacturer launches high-end EVs. Otherwise, the manufacturer launches low-end EVs. Moreover, the subsidy increases consumer surplus and social welfare since the high subsidy makes EVs’ sharing market demand be negative.Originality/valueThis study enriches the literature on vehicle-type strategies for the manufacturer's car sharing, owns a practical significance to guide the manufacturer's operation management in the car sharing market and provides advice on whether the government should provide EVs’ subsidy.
25 citations
TL;DR: In this article, the authors developed an analytical framework to examine whether a C2C sharing platform firm launches its own sharing service in both a monopoly market and a supply chain setting.
Abstract: As the sharing economy is increasingly growing, various sharing business models have been widely adopted in practice. Some sharing platform firms provide their self-owned products in the market operating in a B2C (business-to-customer) sharing model in addition to the original customer-to-customer (C2C) sharing model. In this study, we develop an analytical framework to examine whether a C2C sharing platform firm launches its own sharing service in both a monopoly market and a supply chain setting. Customers in the market are naturally grouped into product owners and renters. We show that the platform firm does not always choose to launch the B2C sharing service, which significantly depends on the proportion of product owners of the C2C sharing product, the consumer acceptance level of the platform firm’s sharing product and the corresponding marginal production cost. We also find that the introduction of the B2C sharing service will always increase total consumer surplus and social welfare. Furthermore, we further investigate whether the platform firm launches the sharing service by offering its own product or procuring it from an upstream supplier, and extend our analysis to a N-period framework and demonstrate that our results are robust.
14 citations
TL;DR: In this paper, a two-period, five-stage game model with sharing utility is developed to analyze how a manufacturer competes with a sharing economy platform that facilitates sharing of the manufacturer's product from both a long-run and a short-run perspective.
14 citations
TL;DR: In this paper, the authors examined the impacts of post sharing on the EV charging market and established game theory models on consumer choices among private, public, and shared options, and provided supporting evidence for policy-makers to promote private charge post sharing, especially with certain consumer subsidization at a reasonable level.
Abstract: The increasing popularity of electric vehicles (EVs) leads to heightened demand for the charging infrastructure. More and more EV drivers install private charge posts, which can now be shared with others through certain mobile apps. This emerging phenomenon is becoming a prominent part of the sharing economy. To examine the impacts of post sharing on EV charging market, this study establishes game theory models on consumer choices among private, public, and shared options. Such peer-to-peer sharing and collaborative consumption redistribute the installation and operation costs of private charge posts in proportion to their increased utilization. Numerical analyses suggest that the sharing mode provides a win-win solution for charge post owners and non-owner consumers, as well as electricity distributors and public charging infrastructure operators. In the case of China, the estimated saving for charge post owners is between 20% and 50%, which can be translated into more non-government investment in the EV industry chain. The findings provide supporting evidence for policy-makers to promote private charge post sharing, especially with certain consumer subsidization at a reasonable level.
9 citations
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TL;DR: In this article, the Stockholm School hypothesis is used to explain how expectations are formed in the context of an isolated market with a fixed production lag, and commodity speculation is introduced into the system.
Abstract: In order to explain fairly simply how expectations are formed, we advance the hypothesis that they are essentially the same as the predictions of the relevant economic theory. In particular, the hypothesis asserts that the economy generally does not waste information, and that expectations depend specifically on the structure of the entire system. Methods of analysis, which are appropriate under special conditions, are described in the context of an isolated market with a fixed production lag. The interpretative value of the hypothesis is illustrated by introducing commodity speculation into the system. 1. INTRODUCTION THAT EXPECTATIONS of economic variables may be subject to error has, for some time, been recognized as an important part of most explanations of changes in the level of business activity. The "ex ante" analysis of the Stockholm School-although it has created its fair share of confusion-is a highly suggestive approach to short-run problems. It has undoubtedly been a
4,984 citations
TL;DR: In this paper, the authors examine the nature of access as it contrasts to ownership and sharing, specifically the consumer-object, consumer-consumer, and consumer-marketer relationships, and identify four outcomes of negative reciprocity resulting in a big-brother model of governance, and a deterrence of brand community.
Abstract: Access-based consumption, defined as transactions that can be market mediated but where no transfer of ownership takes place, is becoming increasingly popular, yet it is not well theorized. This study examines the nature of access as it contrasts to ownership and sharing, specifically the consumer-object, consumer-consumer, and consumer-marketer relationships. Six dimensions are identified to distinguish among the range of access-based consumptionscapes: temporality, anonymity, market mediation, consumer involvement, the type of accessed object, and political consumerism. Access-based consumption is examined in the context of car sharing via an interpretive study of Zipcar consumers. Four outcomes of these dimensions in the context of car sharing are identified: lack of identification, varying significance of use and sign value, negative reciprocity resulting in a big-brother model of governance, and a deterrence of brand community. The implications of our findings for understanding the nature of exchange, consumption, and brand community are discussed.
1,661 citations
TL;DR: In this article, the authors consider the problem of determining the price at which a monopolistic land owner will sell a unit of land in the United States to a large number of owners, assuming that all the land is of uniform quality.
Abstract: ASSUME that a supplier owns the total stock of a completely durable good. At what price will he sell it? To take a concrete example, assume that one person owns all the land in the United States and, to simplify the analysis, that all land is of uniform quality. Assume also that the landowner is not able to work the land himself, that ownership of land yields no utility and that there are no costs involved in disposing of the land. If there were a large number of landowners and the price were competitively determined, the price would be that at which the amount demanded was equal to the amount of land in the United States. If we imagine this fixed supply of land to be various amounts either greater or smaller, and then discover what the competitively determined price would be, we can trace out the demand schedule for American land. Assume that this demand schedule is DD and that from this a marginal revenue schedule, MR, has been derived. Both schedules are shown in Figure I. Let the total amount of land in existence be OQ. Then, if the price were competitively determined, the price would be OB (see Figure I). We now have to determine the price which the monopolistic landowner would charge for a unit of land in the assumed conditions. The diagram would seem to suggest (and has, I believe, suggested to some) that such a monopolistic landowner would charge the price OA, would sell the quantity of land OM, thus maximising his receipts, and would hold off the market the quantity of land, MQ. But suppose that he did this. MQ land and money equal to OA X OM would be in the possession of the original landowner while OM land would be owned by others. In these circumstances, why should the original landowner continue to hold MQ off the market? The original landowner could obviously improve his position by selling more land since he could by this means acquire more money. It is true that this would reduce the value of the land OM owned by those who had previously bought land from him-but the loss would fall on them, not on him. If the same assumption about his behaviour was made as before, he would then sell part of MQ. But this is not the end of the story, since some of MQ would still remain unsold. The process would continue as long as the original landowner retained any land, that is, until OQ had been sold. And if there were no costs of disposing of the land, the whole process would take place in the twinkling of an eye.
1,614 citations
TL;DR: In this paper, a reverse Averch-Johnson result is shown for durable-goods monopolists: if a monopolist is able to rent his product rather than sell it, or to make binding promises about his future production, such problems are ameliorated, and it is shown that the seller will cause a greater deadweight loss than the other types of monopolies.
Abstract: Durable-goods monopolists face special problems because the sale of their products creates a secondhand market not controlled by the monopolist. To the extent the monopolist is able to rent his product rather than sell it, or to make binding promises about his future production, such problems are ameliorated. Given the inability to do the above, the monopolist is led to producing goods less durable than those produced by either competitive firms or monopolist returns. A reverse Averch-Johnson result--that monopolist sellers may invest less in fixed costs (including plant modernization and research and development) than would the renters--is shown. It is also shown that, even though sellers have less monopoly power than renters and nondurable-goods monopolists, it is possible that the seller will cause a greater deadweight loss than the other types of monopolies.
946 citations
TL;DR: The value of quick response to a retailer is generally much greater in the presence of strategic consumers than without them, and provides more value by allowing a retailer to control the negative consequences of strategic consumer behavior.
Abstract: We consider a retailer that sells a product with uncertain demand over a finite selling season. The retailer sets an initial stocking quantity and, at some predetermined point in the season, optimally marks down remaining inventory. We modify this classic setting by introducing three types of consumers: myopic consumers, who always purchase at the initial full price; bargain-hunting consumers, who purchase only if the discounted price is sufficiently low; and strategic consumers, who strategically choose when to make their purchase. A strategic consumer chooses between a purchase at the initial full price and a later purchase at an uncertain markdown price. In equilibrium, strategic consumers and the retailer make optimal decisions given their rational expectations regarding future prices, availability of inventory, and the behavior of other consumers. We find that the retailer stocks less, takes smaller price discounts, and earns lower profit if strategic consumers are present than if there are no strategic consumers. We find that a retailer should generally avoid committing to a price path over the season (assuming such commitment is feasible)---committing to a markdown price (or to not mark down at all) is often too costly (inventory may remain unsold) even in the presence of strategic consumers; the better approach is to be cautious with the initial quantity and then mark down optimally. Furthermore, we discuss the value of quick response (the ability to procure additional inventory after obtaining updated demand information, albeit at a higher unit cost than the initial order). We find that the value of quick response to a retailer is generally much greater in the presence of strategic consumers than without them: on average 67% more valuable and as much as 558% more valuable in our sample. In other words, although it is well established in the literature that quick response provides value by allowing better matching of supply with demand, it provides more value, often substantially more value, by allowing a retailer to control the negative consequences of strategic consumer behavior.
564 citations