The Emergence of a Sharing Market: Pricing, Supply, and Consumption

ABSTRACT

The emerging sharing economy increases the utilization of existing products/services, reduces the consumption of new resources, and gets more popular in recent years. We consider a market where consumers are differentiated by their preference for the product and develop an analytical model to study how a person-to-person (P2P) sharing market (ideal or imperfect) affects the manufacturer’s pricing strategies, consumers’ consumption time, consumer surplus, and social welfare. Surprisingly, we find that the existence of the sharing market may drive up the selling price of the product if the sharing platform can endogenously determine the commission fee of sharing transactions. Accordingly, depending on the transaction costs and the proportion of high-type consumers, we find that consumers’ total consumption time, consumer surplus, manufacturer’s profit, and social welfare may not improve in the presence of a sharing market. This study also offers guidelines for the sharing platform and optimal pricing strategies for manufacturers.

KEY WORDS AND PHRASES:

• Sharing market
• manufacturer pricing
• consumption time
• commission rate
• transaction cost
• consumer surplus
• sharing economy
• P2P markets
• online platforms
• online pricing

Acknowledgments

The authors thank the editor-in-chief and two anonymous reviewers for their constructive comments and suggestions. This research is supported by the National Natural Science Foundation of China (grant numbers: 71872144, 72171132).

Disclosure Statement

No potential conflict of interest was reported by the authors.

Supplementary information

Supplemental data for this article can be accessed on the publisher’s website

Notes

¹ ${\alpha }^{\ast }{\tilde{a}}^{\ast }aretherealrootsforsolving{\left(-1+{\theta }_H-{\theta }_L\right)}^2\left(\frac{1}{2}{\alpha }^3-{\alpha }^2\right)+\frac{1}{2}({{\theta }_H}^2+{{\theta }_L}^2)\alpha +{\theta }_L\left(1-{\theta }_H\right)\alpha =\frac{{{\theta }_L}^2}{2}$

² ${\alpha }^{\ast \ast }=\stackrel{\wedge }{\alpha }$, if $\tilde{\alpha }$ $>\stackrel{\wedge }{\alpha }$; ${\alpha }^{\ast \ast }={\left(\frac{{{\theta }_H}^2-{{\theta }_L}^2}{{\left({\theta }_H-1\right)}^2-{{\theta }_L}^2}\right)}^{\frac{1}{2}}$, if $\tilde{\alpha }<\stackrel{\wedge }{\alpha }$.

Additional information

Notes on contributors

Ling Ding

Ling ding ([email protected]) is a joint PhD candidate of Xi’an Jiaotong University, China, and City University of Hong Kong. He received a bachelor’s degree from the Business School, Xi’an Jiaotong University. His research interests include sharing economy and live-streaming pricing. His research has been published in the Journal of Electronic Commerce Research and presented at INFORMS Annual Meeting in Seattle.

Juan Feng

Juan feng ([email protected]; corresponding author) is Hon Hai chair professor in the School of Economics and Management, and a professor in Shenzhen International Graduate School, Tsinghua University, China. She her PhD in business administration (in information management) from Pennsylvania State University, with a dual title in operations research. Dr. Feng’s research interests include IT pricing, competition, advertising, and SaaS; online reviews and user-generated content; and blockchain and data governance. Her work has been published in Information Systems Research, Journal of Management Information Systems, Management Science, Marketing Science, Productions and Operations Management, and many other journals.

Xiuwu Liao

Xiuwu liao ([email protected]) is a professor in the School of Management, Xi’an Jiaotong University, China. He received his doctorate from Dalian University of Technology, China. Dr. Liao’s research covers multicriteria decision making, cloud service pricing, social commerce, online reviews, and IT outsourcing. He has published in Information Systems Research, International Journal of Electronic Commerce, Decision Support Systems, Information Systems, Knowledge-Based Systems, and other journals.

Lu Yang

Lu yang ([email protected]) is a graduate student in the School of Management, Xi’an Jiaotong University, China. His research focuses on the sharing economy and user-generated content pricing.