"Peer-to-Peer Product Sharing: Implications for Ownership, Usage and Social Welfare in the Sharing Economy"

ABSTRACT

We describe 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 from renting their products to non-owners while non-owners are able to access these products through renting on as needed basis. We characterize equilibrium outcomes, including ownership and usage levels, consumer surplus, and social welfare. We compare each outcome in systems with and without collaborative consumption and examine 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. Our 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. We 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. We also show that 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. (Joint work Xiang Li, Guangwen Kong, and Costas Courcoubetis). 

BIO

Saif Benjaafar is Distinguished McKnight University Professor and Professor of Industrial and Systems Engineering at the University of Minnesota, and a Fellow at the Institute on the Environment. He is Founding Director of the Department of Industrial & Systems Engineering at the University of Minnesota, where he is 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. He Holds PhD and MS degrees from Purdue University and a BS 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 Science, OR, and MSOM. His research has been funded by NSF, DOT, DHS, and DARPA in the US 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 served on the Technology Advisory Board of Keppel Corporation.

WEBSITE