Consumer-to-Consumer Product Trading With Strategic Consumer Behaviors in the Sharing Economy

Technological advancements have led to an increase in the popularity of consumer-to-consumer product trading (C2C-PT). How C2C-PT affects the manufacturer (called the “firm”) and consumers in the market is unclear. We, therefore, build analytical models to explore this problem. We consider a case in which a firm develops and sells a product to consumers in the market. Consumers possess heterogeneous random valuations of the product and are strategic in the sense that they are forward-looking utility maximizers. The firm makes the optimal decision on the product selling price. We study the impacts of C2C-PT on both the firm and consumers. We identify the optimal purchasing decision for the consumers and establish the optimal pricing policy for the firm. We show that the presence of C2C-PT may either benefit or hurt the firm and consumers, while the consumer's strategic behavior will always bring harm to the firm. Most interestingly, we prove that strategic purchasing behavior is not always beneficial to consumers themselves.

I. Introduction

The sharing economy has recently grown dramatically [5], [7] and has led to changes in manufacturing and supply chain operations. Technological advances and the increasing popularity of mobile devices and apps have led to the establishment of numerous platforms [43], such as Airbnb, Uber, and eBay. These platforms offer various sharing economy services, which can be free or paid, or operate through bartering and exchanging goods and services. The sharing economy has permeated many aspects of our daily lives, and includes the sharing of homes, rides, clothes, books, toys, and digital products. According to statista.com, about 44.8 million adults used sharing economy services in the US in 2016, and this figure was forecasted to increase to 86.5 million by 2021.¹

eMarketer, “Number of sharing economy users in the United States from 2016 to 2021 (in millions)”, Statista, [Online]. Available: https://www.statista.com/statistics/289856/number-sharing-economy-users-us/ (Accessed: 30 Jul. 2019).