Pricing and capacity allocation strategies: Implications for manufacturers with product sharing

Abstract

AbstractEmerging sharing modes, like the consumer‐to‐consumer (C2C) sharing of Uber and the business‐to‐consumer (B2C) sharing of GoFun, have considerably affected the retailing markets of traditional manufacturers, who are motivated to consider product sharing when making pricing and capacity decisions, particularly electric car manufacturers with limited capacity. In this paper, we examine the equilibrium pricing for a capacity‐constrained manufacturer under various sharing modes and further analyze the impact of capacity constraint on the manufacturer's sharing mode selection as well as equilibrium outcomes. We find that manufacturers with low‐cost products prefer B2C sharing while those with high‐cost products prefer C2C sharing except when the sharing price is moderate. However, limited capacity motivates manufacturers to enter into the B2C sharing under a relatively low sharing price, and raise the total usage level by sharing high‐cost products. We also show that the equilibrium capacity allocated to the sharing market with low‐cost products first increases and then decreases. Finally, we find that sharing low‐cost products with a high limited capacity leads to a lower retail price under B2C sharing, which creates a win‐win situation for both the manufacturer and consumers. However, sharing high‐cost products with a low limited capacity creates a win‐lose situation for them.