Paccar Hall, Room 293

Seminar Speaker: Guangwen Kong
Affiliation: University of Minnesota
Area: Operations Management

Name of Presentation:
The Promise and Paradox of Sharing Economy: Implications for Ownership, Usage and Social Welfare

Abstract:
We are witnessing, across a wide range of domains, a shift away from the exclusive ownership and consumption of resources to one of shared use and consumption. This shift is taking advantage of innovative new ways of peer-to-peer sharing that are voluntary and enabled by internet-based exchange markets and mediation platforms. Value is derived from the fact that many resources are acquired to satisfy infrequent demand but are otherwise poorly utilized.  We describe an equilibrium model of peer-to-peer product sharing, or collaborative consumption, where individuals with varying usage levels make decisions about whether or not to own a homogenous product. Owners are able to generate income from renting their products to non-owners while non-owners are able to access these products through renting on as needed basis. We characterize equilibrium outcomes, including ownership and usage levels, consumer surplus, and social welfare. We compare each outcome in systems with and without collaborative consumption and examine the impact of various problem parameters. Our findings indicate that collaborative consumption can result in either lower or higher ownership and usage levels, with higher ownership and usage levels more likely when the cost of ownership is high. Our findings also indicate that consumers always benefit from collaborative consumption, with individuals who, in the absence of collaborative consumption, are indifferent between owning and not owning benefitting the most. We study both profit maximizing and social welfare maximizing platforms and compare equilibrium outcomes under both in terms of ownership, usage, and social welfare. We find that the difference in social welfare between the profit maximizing and social welfare maximizing platforms is relatively modest.