Peer-to-Peer Product Sharing

Abstract

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.