The Emergence of a Sharing Market : Pricing, Supply, and Consumption

The emergence of a sharing economy increases the utilization of existing products/services and reduces the consumption of new resources. We consider a market where consumers are differentiated in their consumption level of the product and develop an analytical model to study how a sharing market affects manufactures' pricing strategies, consumers' consumption of the product, consumer surplus and social welfare. Surprisingly, we find that the existence of the sharing market may drive up the selling price of the product (if the sharing platform can endogenously determine the commission rate for sharing transactions). Accordingly, depending on the proportion of high-type consumers who purchase the product and share it with low-type consumers, we find that consumers' total consumption of the product, consumer surplus, the manufacturer's profit, and social welfare may not improve in the presence of a sharing market. This study also offers guidelines for the sharing platform and optimal pricing strategies for manufacturers