Strategic Pricing, Lifespan Choices and Environmental Implications of Peer-to-Peer Sharing

Peer-to-peer sharing has become increasingly popular in recent years. Many digital platforms exist that allow individuals to use others’ belongings part-time. These platforms explicitly mention their green credentials, as the environmental benefits of such sharing initiatives are often taken for granted. However, several recent empirical studies show evidence of the contrary. For the first time in the literature, we provide a theoretical framework to analyze the economic and environmental implications of peer-to-peer sharing. We present a stylized model where a monopolist supplies a product that is suitable for rent on a sharing platform. Counterintuitively, we find that the existence of such a platform is typically beneficial for the monopolist, especially if it can strategically choose the price and lifespan of the product to affect the use price in the sharing market. Such a scenario is not at all beneficial for consumers, especially for those who rent the good rather than buy it. Moreover, the existence of the sharing platform induces higher use and (under some likely conditions) larger production levels and shorter lifespans of the products. The combination of these three aspects contributes to a worse environmental impact with sharing, which provides a theoretical rationale for the aforementioned empirical studies.