Symposium on the Sharing Economy

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Research Workshop Session III: Ownership and Consumption in the Sharing Economy

Peer-to-Peer Product Sharing: Implications for Ownership, Usage, and Social Welfare

This presentation reviewed 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. Owners are able to generate income by renting their products to non-owners while non-owners are able to access these products through renting on an as-needed basis. The presentation also described how the research team characterized equilibrium outcomes, including ownership and usage levels, consumer surplus, and social welfare. The team also compared each outcome in systems with and without collaborative consumption and examined the impact of various problem parameters, including rental price, platform's commission fee, cost of ownership, owner's moral hazard cost, and renter's inconvenience cost.

Findings indicate that, depending on the rental price, 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. They also show that consumers always benefit from collaborative consumption, with individuals who, in the absence of collaborative consumption, are indifferent between owning and not owning benefiting the most. In addition, the platform's profit is not monotonic in the cost of ownership, implying that a platform is least profitable when the cost of ownership is either very high or very low.

Saif Benjaafar is the Distinguished McKnight University Professor in the Department of Industrial & Systems Engineering at the University of Minnesota. He is also the founding director of the Department of Industrial & Systems Engineering, director of the Center for Supply Chain Research, and director of Initiative on the Sharing Economy. He is a founding member of the Singapore University of Technology and Design, where he served as Head of Pillar (at the rank of Dean) for Engineering Systems and Design. He was a Distinguished Senior Visiting Scientist at Honeywell Laboratories and a visiting professor at universities in France, Belgium, Hong Kong, China and Singapore. 

Benjaafar holds Ph.D. and M.S. degrees from Purdue University and a B.S. degree from the University of Texas at Austin. His research is in the area of operations and supply chain management, with a current focus on sustainability and business model innovation. His papers have been published in various journals, including Management ScienceOR, and MSOM. His research has been funded by NSF, DOT, DHS, and DARPA in the U.S. and by NRF and MOE in Singapore. His research work has been recognized by numerous awards, including the Harold Kuhn Award, the MSOM Best Paper Award, and the IIE Fellow Award, among others. He has consulted widely with leading companies and organizations, such as Honeywell, General Mills, 3M, and the World Bank, among many others. He also served on the Technology Advisory Board of Keppel Corporation.   


Owning, Using, and Renting: Some Simple Economics of the “Sharing Economy”

New Internet-based markets enable consumer/owners to rent out their durable goods when not using them. Such markets are modeled to determine ownership, rental rates, quantities, and surplus generated. Both the short run, before consumers can revise their ownership decisions, and the long run, in which they can, are examined to assess how these markets change ownership and consumption. This presentation examined bringing-to-market costs, such as labor costs and transaction costs, and considered the operating platform's pricing problem. A survey of consumers broadly supports the modeling assumptions employed. For example, ownership is determined by individuals' forward-looking assessments of planned usage.

John Horton is an assistant professor of information, operations and management sciences at New York University's Stern School of Business. Horton's research focuses on the intersection of labor economics, market design, and information systems. He is particularly interested in improving the efficiency and equity of matching markets. After completing his Ph.D. and prior to joining Stern in 2013, Horton served for two years as the staff economist for oDesk, an online labor market. In the summer of 2015, Horton was a visiting data scientist at Uber Technologies, working on improving their reputation system and developing new tools for analyzing trip data. Horton received a B.S. in mathematics from the United States Military Academy at West Point and a Ph.D. in public policy from Harvard University.


Incentives and Equilibria for a Heterogeneous Population Interacting in the Sharing Economy

This presentation reviewed a project that defined a discrete choice model for a society of non-homogeneous players interacting through a sharing platform. Each player alternates between two phases: the working phase, in which the player may choose to work to obtain a salary, and the task phase. In the latter phase, the player needs access to a specific service to perform a personal task that is of positive value to her. The service involves access to a specific asset: for example, a vehicle is required to provide transportation as a service. The key feature is that the service may be used simultaneously by more than one player—for example, multiple persons sharing a ride using the same car. A player may satisfy her need for the service by either providing it herself—in case she has access to the required asset—or renting it from others that provide the service through the sharing platform. The player may also choose to become a full-time service provider and, instead of earning a salary in the working phase, choose to provide service to others continuously. Lastly, the player may choose to not participate in the sharing platform and use alternative means to satisfy her needs.

All players are given the same strategy sets but differ on their valuation for the service and the amount of their normal salary. Differentiating players in both utility and salary allows for the characterization of situations in which players choose to forego their salary and generate income from selling the service to the other participants in the society independently of their own needs. Consequently, the team studied the equilibria and social welfare in such a system.

Harald Bernhard is a Ph.D. candidate at the Singapore University of Technology and Design.