Build or join a sharing platform? The choice of manufacturer's sharing mode

Abstract

Facing the upsurge of sharing economy, in order to regain market opportunities, traditional manufacturers have provided product sharing services through two sharing modes. One mode is the self-built mode, the manufacturer will build a sharing platform on which consumers' rental is relatively inconvenient. The other mode is the joined mode, the manufacturer will join a third-party sharing platform on which the manufacturer is charged a commission fee. In this paper, we develop an analytical framework consisting of a manufacturer and a third-party sharing platform to study the optimal choice of manufacturer's sharing mode, in which consumers' preference toward renting manufacturer's products is heterogeneous. Our analysis shows that the manufacturer will not provide product sharing service when the commission rate, the consumers' inconvenient cost and the marginal cost are all high. Further, we obtain the optimal choice of sharing mode, that is, when the consumers' inconvenient cost is relatively low but the marginal cost is relatively high, the manufacturer will build a sharing platform, while when the consumers' inconvenient cost is relatively high but the marginal cost is relatively low, the manufacturer will join a third-party sharing platform. We also find that the choice of sharing mode is influenced by the proportion of consumers who prefer to rent manufacturer's products. As the proportion increases, the manufacturer is more likely to join the third-party sharing platform.