Inhibit violations in business-to-peer product sharing via heterogeneous punishment, firm decisions and subsidies

Abstract

Violations in business-to-peer (B2P) product sharing such as theft and vandalism may cause firm bankruptcy and social welfare reductions. Taking bike-sharing as an example, this paper develops a non-atomic game model to characterize the collective behaviors of rational consumers and investigates how to inhibit violations in the B2P market. We assume that individuals are heterogeneous in the expected punishment cost, and each individual can choose to be a compliant consumer, violating consumer, or a non-use consumer. The equilibrium results reveal that lowering the price and increasing the initial number of shared products can suppress violations, however, the firm profit is maximized when violators are reduced to a certain percentage, which diverges somewhat from social welfare. To further eliminate violations, the subsidy mechanism is introduced, which can efficiently reduce the ratio of violators while increasing both the firm profit and social welfare, even though the firm’s response to subsidy weakens its effect, and the increase in social welfare exceeds the investment in subsidies.