New Results on Sharing Economy Presented at HICSS 2015

Together with professors Eric K. Clemons (Wharton School; middle) and Prof. Robert J. Kauffman (Singapore Management University; right), Prof. Weber (left) has been organizing a HICSS mini-track on the economics of information systems since 2009. This year’s minitrack on “Society, Information, Technology, and Economics” featured selected papers and presentations about the impact of information systems at the societal level. A special section of the Journal of Management Information Systems (JMIS), co-edited by Clemons, Kauffman, and Weber, joint with Prof. Rajiv M. Dewan (University of Rochester), to appear later in 2015, will feature a number of full-length papers developed from the HICSS mini-track.

The tradeoff between buying and sharing. When sharing is a possibility, both as a lender and as a borrower, the decision to purchase becomes more complex. Faced with an uncertain future need for a relatively expensive item, such as a power drill, a consumer who considers buying the item today may have two conflicting thoughts. On the one hand, buying a power drill today would allow him (or her) to start drilling holes immediately. On the other hand, when the need for drilling holes today is not particularly high, then there may be the possibility of borrowing the item tomorrow in sharing market, should the need for drilling holes eventually arise. The balance between owners and non-owners, and between consumers in a low-need state versus consumers in a high-need state determines the rental rate in a sharing market. The expectations about the future rates in the sharing market should be taken into account when trying to decide whether to purchase the item today. A tradeoff arises because while a high expected price of sharing (i.e., an expensive rental rate) may be good for an owner of the item, it is at the same time bad news for a non-owner. Conversely, too many owners tend to create an oversupply of available items for sharing, lowering the expected price in the sharing market. The latter is good news for non-owners, thus decreasing the incentives for ownership. The equilibrium demand for ownership is a result of this tradeoff.

Prof. Weber’s paper introduces a stylized model which examines consumers’ relevant decisions over two time periods, a purchasing period (t=0) and a sharing period (t=1). The model allows for consumer heterogeneities in terms of the current need and the expected future need for a given durable good, such as a power drill. The key result of the paper is that with the possibility of sharing the sales of a durable good can either go up (when the purchase price is relatively high) or go down (when the purchase price is relatively low), depending on the problem parameters. The model in the paper also allows for an imbalance in the sharing market, that is, a situation with either excess demand or excess supply.

Related presentations. On December 11-12, 2014, Prof. Weber was an invited speaker at the opening session of the ESRC Seminar Series on Collaborative Housing and Community Resilience, co-organized by the UK Cohousing Network, the Universities of Newcastle, Lancaster, Leeds, Nottingham, Sheffield, and the London School of Economics. He presented an overview of “Sharing Rather than Owning: Intermediation and Collaborative Consumption.” On March 31, 2015, Prof. Weber will take part in an invited conference at the Maison Heinrich Heine in Paris, co-organized by the Fondation Suisse (CIUP), on “The Sharing Economy” where he will discuss the topic of collaborative consumption together with Prof. Carl Christian von Weiszäcker (University of Cologne, emeritus) and Prof. Harald Heinrichs (University of Lüneburg).

Reference
Weber, T.A. (2015) “The Question of Ownership in a Sharing Economy,” Proceedings of the 48th Annual Hawaii International Conference on System Sciences (HICSS), IEEE Computer Society, Washington, DC, pp. 4874—4883.