Scale and the Sharing Economy

Abstract

This chapter explores the role of scale in the sharing economy. The sharing economy has produced a dichotomy of scale. On one hand, companies such as Uber and Airbnb have amassed multi-billion dollar valuations by facilitating millions–even billions–of homesharing and ride-hailing transactions. On the other hand, each individual, peer-to-peer transaction–between host and guest on Airbnb, or driver and passenger on Lyft and Uber–is a small-scale one, a de minimis contributor to the overall extent of homesharing and ride-hailing activity occurring on these platforms. This dichotomy of scale – large amounts of small-scale activity – is key to the tremendous growth of the sharing economy. However, when “everything is small, the regulatory challenge is immense. I suggest in this chapter that scale is a defining feature of the sharing economy and that effective governance of the sharing economy requires a more complete understanding of the role of scale. As small-scale activities that once fit criteria for regulatory leniency occur in large numbers, the regulatory calculus changes. Recognizing the role of scale in the sharing economy is a crucial step to adapting our governance tools to address negative cumulative impacts and regulatory fractures resulting from large numbers of small-scale homesharing and ride-hailing activities. This chapter proceeds in three parts. Part I provides an overview of the role of scale in the sharing economy, analyzing how companies such as Airbnb and Uber have leveraged the network orchestrator business model to facilitate massive numbers of small-scale transactions. Part II situates the issue of scale in the broader regulatory context by unpacking the governance responses to small-scale activities. I discuss why small-scale activities are often subject to regulatory leniency, and how the governance response tends to shift as small-scale activities increase in number. Part III develops the case for a regulatory response to scale in the sharing economy on three grounds. First, negative cumulative impacts can result from large numbers of small-scale homesharing and ride-hailing activities, such as decreased long-term rental availability or increases in vehicle congestion and emissions. Second, existing regulations are ill-suited to the three-sided, network orchestrator model of the sharing economy, and the failure to address this misfit is producing regulatory fractures that threaten to undermine civil rights laws and other important public policies. Finally, the traditional justifications for regulatory leniency for small-scale activities do not apply with full force to the networked peer-to-peer activities occurring in the sharing economy.