Competition between manufacturers and sharing economy platforms: An owner base and sharing utility perspective

Abstract

We develop a two-period, five-stage game model with sharing utility 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. We use the subgame perfect Nash equilibrium to reveal how the manufacturer chooses its long-run (period-1) price to foster an owner base (a collection of the period-1 product buyers) that in turn affects its short-run (period-2) competition with the sharing economy platform (hereafter, platform for short). Analytical results show that (1) in the short run, an increase in the owner base has a negative (non-monotonic) impact on the profitability of the manufacturer (platform) while an increase in sharing utility negatively (positively) affects the profitability of the manufacturer (platform); (2) in the long run, the existence of the platform could be irrelevant for, pose a threat to, or benefit the manufacturer contingent upon different levels of sharing utility; (3) in the long run, a win-win scenario is attainable for both the manufacturer and platform when sharing utility is high enough. The managerial implication of this research is that the manufacturer and platform should collaborate to improve sharing utility to a sufficiently high level by enhancing the sense of community belonging, fostering benefits from sharing activities, and addressing sustainability concerns, thereby achieving a win-win result.