An Economic Analysis of Online Sharing Systems' Implications on Social Welfare

The rise of online sharing systems offers consumers the opportunity to grant other consumers access to infrequent-use goods or spaces they own, or the opportunity to access those they do not. Thereby, consumers’ decision-making and usage behaviors are likely to change, which in turn will affect consumer surplus and thus social welfare. Within this paper, first steps towards understanding the economic implications of online sharing systems upon social welfare are explicated, specifically those relating to consumer decision-making and usage behavior. Preliminary results indicate: (I) The number of uses for consumers (deciding to buy and share) increases in their individual monetary utility per use, increases in aggregate sharing supply, and decreases in aggregate sharing demand. (II) The number of uses for consumers (deciding to share and not buy) increases in their individual monetary utility per use, increases in aggregate sharing supply, and decreases in aggregate sharing demand. Further, a research agenda is presented in order to develop this paper by investigating following steps: (i) how consumers are categorized into different consumer segments; (ii) how sharing system providers set fees for using online sharing systems; and (iii) how online sharing systems affect consumer and producer surplus and how subsequently social welfare is influenced.