COLLABORATIVE CONSUMPTION - Business-to-consumer sharing and its economic impact on consumers

Abstract

Collaborative consumption, which strives to increase the use of underused goods, has the potential to change the unsustainable trend of consumption while still benefitting consumers economically. Yet, the collaborative initiatives where businesses offer consumers temporary access to shared goods have not been theoretically examined on a general scale. We develop a simple model to evaluate the impact business-to-consumer sharing has on consumers. Our findings suggest that (i) goods are utilized more when they are shared, (ii) introducing a sharing market may decrease consumption of new goods, despite enabling new consumers to enter the market, and (iii) consumer surplus increases when the sharing price is lower than the ownership price. The paper also expands on the terminology around collaborative consumption, and highlights the differences between renting and sharing. The distinction is identified as a difference in the decision making, where the choice to share is made ex ante while decision to rent is made ex post.