Pricing in C2C Sharing Platforms

Sharing platforms such as zilok.com enable sharing of durable goods among consumers, and seek to maximize profits by charging transaction-based platform fees. We develop a model in which consumers who have heterogeneous needs concerning the use of a durable good decide whether to purchase and share (i.e., be a lender) or borrow (i.e., be a borrower), and a monopoly sharing platform determines the platform fees. We find, first, that consumers with greater need to use a durable good purchase and share, and that consumers with lesser need borrow. Second, sharing platforms maximize profits only if the supply of a durable good matches demand-that is, the market must clear in order for platform fees to be profit maximizing. Third, the market-clearing condition requires lender and borrower fees are classic strategic complements. Fourth, to maintain the market-clearing condition, sharing platforms have to increase their lender fee or decrease their borrower fee in response to increases in the sharing price, increases in usage capacity, and decreases in the purchase price of a durable good, and vice versa. These findings indicate that commonly applied one-sided pricing models in sharing platforms can be improved.