Externalities in endogenous sharing economy networks

ABSTRACT

This paper investigates the impact of link formation between a pair of agents on the resource availability of other agents (that is, externalities) in a social cloud network, a special case of endogenous sharing economy networks. Specifically, we study how the closeness between agents and the network size affect externalities. We conjecture, and experimentally support, that for an agent to experience positive externalities, an increase in its closeness is necessary. The condition is not sufficient though. We, then, show that for populated ring networks, one or more agents experience positive externalities due to an increase in the closeness of agents. Further, the initial distance between agents forming a link has a direct bearing on the number of beneficiaries, and the number of beneficiaries is always less than that of non-beneficiaries.

KEYWORDS:

• Endogenous
• sharing economy
• network
• externalities
• social cloud

JEL CLASSIFICATION:

• C91
• D62
• D85
• L86

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

¹ buddybackup.com.

² crashplan.com.

³ aws.amazon.com/s3.

⁴ azure.microsoft.com.