“The Promise and Perils of Collaborative Consumption (Peer-to-Peer Product Sharing)” by Professor Saif BENJAAFAR
Professor Saif BENJAAFAR
Distinguished McKnight University Professor
College of Science and Engineering
University of Minnesota
We are witnessing a growing trend away from the exclusive ownership and consumption of resources to one of shared use and consumption. This shift is taking advantage of innovative new ways of peer-to-peer sharing that are voluntary and enabled by internet-based exchange markets and mediation platforms. Value is derived from the fact that many resources are acquired to satisfy infrequent demand but are otherwise poorly utilized. Several successful businesses, such as AirBnB for home sharing and RelayRides for the sharing of private cars, provide evidence of the viability of collaborative consumption. (Collectively, these businesses and other manifestations of the collaborative consumption of products and services are giving rise to what has become known as the sharing economy.) Collaborative consumption raises several questions. How does collaborative consumption affect ownership and usage of resources? Is it necessarily the case that collaborative consumption leads to leads to lower ownership, lower usage, or both (and therefore to improved sustainability)? If not, what conditions would favor lower ownership, lower usage, or both? Who benefits most from collaborative consumption, the owners, renters or the mediation platform? To what extent would a profit-maximizing platform through its choice of rental prices and membership fees improve social welfare? To what extent do frictions, such as moral hazard (additional wear and tear renters place on rented resources) affect platform profit and social welfare? In this talk, we describe an equilibrium model of collaborative consumption and use it to address these and other questions and to offer insights into the benefits and pitfalls of the sharing economy.