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research article

The Advent of the Sharing Culture and its Effect on Product Pricing

Razeghian, M.
•
Weber, Thomas A.  
2019
Electronic Commerce Research and Applications

Empirical observations suggest that consumers' propensity towards sharing varies with culture and the individuals' socio-demographic characteristics. In an economy with overlapping generations of heterogeneous consumers, we study optimal dynamic selling by a durable-goods monopolist in equilibrium. Feasible dynamic pricing strategies include second-degree price discrimination offering intertemporal consumption bundles in the form of rental and/or purchase options. We find that as the population's peer-trade propensity increases, possibly due to a cultural shift from private ownership to collective consumption, the durable-goods monopolist's optimal strategy shifts from unbundling (offering exclusively rentals), via mixed bundling (offering the options of rental and purchase side-by-side), to pure bundling (offering purchase only). We show that an increase in peer-trade propensity has an ambiguous effect on the firm's profit. Cultural shifts from low to high peer-trade propensity may be delayed by a firm's attempts to artificially disable sharing markets by offering overly low rental rates. However, beyond a certain threshold of peer-trade propensity, the firm prefers a cultural transition to an access-based economy. The underlying reason is that the asset base of a sharing economy ultimately depends on the firm's output, so that a portion of the anticipated rents from sharing can be captured by the durable-goods monopolist.

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Type
research article
DOI
10.1016/j.elerap.2018.06.001
Author(s)
Razeghian, M.
Weber, Thomas A.  
Date Issued

2019

Published in
Electronic Commerce Research and Applications
Volume

33

Article Number

100801

Editorial or Peer reviewed

REVIEWED

Written at

EPFL

EPFL units
OES  
Available on Infoscience
May 22, 2018
Use this identifier to reference this record
https://infoscience.epfl.ch/handle/20.500.14299/146557
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