Publication

Optimal Retail in a Sharing Economy

2016
Conference Papers

Abstract

The emerging sharing economy is fueled by products that some consumers buy new. This paper introduces an overlapping-generations model to analyze consumers' consumption choices and the equilibrium in the sharing market. We derive a retailer's optimal pricing strategy and determine the payoff effects of sharing. The presence of a sharing market increases the price of new products, and therefore a retailer may or may not benefit from the existence of a sharing market, depending on how much more inelastic the demand of the remaining buyers becomes. The retailer's benefits from sharing are largest for high-cost products and in a setting where consumers are relatively patient so that they care about their future consumption options.

Official source

https://infoscience.epfl.ch/entities/publication/9d4e86b7-855c-4a54-a0da-bb83b435427e

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2016
Conference Papers

Abstract

Official source

https://infoscience.epfl.ch/entities/publication/9d4e86b7-855c-4a54-a0da-bb83b435427e

About this result

Related concepts (32)

Retail

Retail is the sale of goods and services to consumers, in contrast to wholesaling, which is sale to business or institutional customers. A retailer purchases goods in large quantities from manufacturers, directly or through a wholesaler, and then sells in smaller quantities to consumers for a profit. Retailers are the final link in the supply chain from producers to consumers. Retail markets and shops have a very ancient history, dating back to antiquity. Some of the earliest retailers were itinerant peddlers.

Price discrimination

Price discrimination is a microeconomic pricing strategy where identical or largely similar goods or services are sold at different prices by the same provider in different market segments. Price discrimination is distinguished from product differentiation by the more substantial difference in production cost for the differently priced products involved in the latter strategy. Price differentiation essentially relies on the variation in the customers' willingness to pay and in the elasticity of their demand.

Consumer choice

The theory of consumer choice is the branch of microeconomics that relates preferences to consumption expenditures and to consumer demand curves. It analyzes how consumers maximize the desirability of their consumption (as measured by their preferences subject to limitations on their expenditures), by maximizing utility subject to a consumer budget constraint. Factors influencing consumers' evaluation of the utility of goods include: income level, cultural factors, product information and physio-psychological factors.

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Optimal Retail in a Sharing Economy

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