Sharing Economy

Question 1

Sharing economy

Answer 1

Platforms combine organisational and market mechanisms in innovative ways to gain competitive advantages over incumbents —> What distinguishes sharing economy platforms from traditional marketplaces, supplier networks, third-party intermediaries, service integrators and such, is the way they combine organisational and market mechanisms to coordinate platform participation and, ultimately, to create value

Question 2

Characteristics of sharing economy platforms

Answer 2

1. Access over ownership. Consumer attitudes and behaviours are increasingly shifting from hyper- consumerism and the primacy of buying goods toward buying access to goods and “servitized” products (e.g., streaming movies on Netflix rather than buying DVDs, relying on Uber rather than
   buying a car). This development is also called access-based consumption or the on-demand economy.
2. Peer-to-peer. Internet-based networks and platforms increasingly mediate interactions and transactions among peers typically coordinated by trust relationships and personal reputation (e.g., buying second-hand goods on eBay). This development is also called the peer-to-peer economy.
3. Allocation of idle resources. More and more private individuals participate casually in economic activities by resorting to privately owned resources (both assets and labor), which would otherwise remain idle (e.g., renting out private, unused storage space on ShareMyStorage). This development is sometimes called collaborative consumption

Question 3

Challenge to incumbent firms:

Answer 3

• Do not need large initial investments to capture the value of direct and indirect network effects. The attraction and value of a sharing economy service increases with the number of its users
• Way though which incumbent firms react to competition from sharing economy platforms: acquisitions, collaboration (ex. Toyota has signed an auto-leasing deal with Uber), and competition (local taxi companies have created mobile apps to compete with Lyft)
• Issue: whether they use irregular or even illegal means to put incumbent industries at a competitive disadvantage. ex. Uber, which offers a similar service to taxi, does not comply with the same rules and regulations.

Question 4

Sharing economy models

Answer 4

1. Control= the level of participants’ independence in the sharing or renting of resources.

• Tight control: when the platform owner specifies, standardises and monitors all those aspects of platform participation that can be used to keep the costs of transacting low.—> ex. Uber
• Loose control: the platform owner defines only minimum standards or guiding principles.
  In this situation, coordination is concerned with orchestrating or supporting platform participation (rather than dictating it) —> ex. Airbnb which only give suggestions to the hosts
  2. Rivalry= the degree to which a market mechanism is in place on the platform.
• High rivalry: when the platform owner prices the service dynamically based on an in- house (and usually secret) algorithm that takes account of changes in supply and demand on the platform. , the platform is run as if it was a market in which supply-side participants compete for demand-side participants. —> high rivalry stimulates participants to
  contribute more effort to either increase service quality (ex. Uber drivers with higher ratings will be offered more rides) or in differentiating the service (ex. Airbnb hosts offering extra services will receive more booking requests)
• Low rivalry: prices, if there are any, are based on compensating or sharing the costs of the
  supply side; because prices remain stable, supply-side participants compete with each other for compensation rather than for making a profit —> ex. Handy per-task hiring platform, sets fixed prices according to the nature of the task and the qualifications required to fulfill it. / Couchsurfing, prohibits monetary charges for renting out accommodation but expects participants to barter or exchange gifts.

Loose & High: Chaperone, Airbnb
Loose & Low: Gardener, Couchsurfing
Tight & High: Franchisers, Uber
Tigh & Low: Principals, Handy

Question 5

Reasons for sharing economy platforms ceasing to operate

Answer 5

1. Lack of platform providers: imbalance between the number of providers and the number of consumers who participate in a sharing business’s platform —> The lack of consumers on the demand side causes a lack of providers on the supply side, and vice versa
   A lack of participants usually resulted from insufficient or ineffective marketing, which is the result of an inadequate market focus
2. Insufficient analysis if the sharing market after designing the services
3. Trust and safety concerns since sharing businesses rely on providers of resources and have little control over service delivery or quality.
4. Hidden resource requirements: sharing businesses are especially affected by this issue because they tend to think that operating the business is simple and so underestimate the required resources —> often have problems in understanding their business complexity, shortage in times, personnel, financial resources + sharing enterprises tend to be less prepared for the resource demands than managers of traditional businesses.
5. Unscalable technical design: sharing platform is its ability to scale up quickly to accommodate growing consumer demand that can be satisfied by growing provider supply without requiring additional resources —> however the complexity of the design does not allow for quick changes, having severe implications during operations
6. Unclear legal environment: Managing the threat of unforeseen legislative barriers is difficult, because sharing businesses typically operate in a legal gray area regarding the use of privately owned resources for business purposes
7. Business termination though acquisition: a way of eliminating competition and acquiring its customer base rather than acknowledging and integrating its competencies

Question 6

FOUR MODELS OF SHARING ECONOMY PLATFORMS: lessons learned

Answer 6

1. Understand the strategic intent of sharing economy platforms —> note that a sharing economy platform may offer different services based on different models. ex. uberPOOL operates according to the Gardener model, matching drivers with passengers going to the same destination and who are willing to share the costs of the ride.
2. Complement your product portfolio with services to take against existing potential sharing economy competitors
3. Access new modes of innovating
4. Engage consumers in value creating: ex. PatientsLikeMe- online community enables people suffering from chronic diseases to self-report their health conditions. The data they provide to the platform is used to discover possibilities for new experiments and the development of new treatments by medical researchers and the pharmaceutical industry
5. Ensure strategic fit by optimising the combination of organisational and market coordination mechanism —> main consideration when establishing a sharing economy

platform is how the platform owner facilitates and benefits from peer-to-peer sharing or renting of privately owned idle resources.

Question 7

Recommendations for ensuring success in the sharing economy

Answer 7

1. Ensure an appropriate level of reliance on business partners: ex. Business partners, such as car rental companies that participate in a car-sharing service, attract customers because they add credibility to the service and extend the offering on the platform.
2. Don’t rely on indirect income as adv, partnerships or data trades which are very risky—> The income of successful platforms came from various kinds of membership or transaction fees from providers or consumers, or both.
3. Don’t focus on self-service
4. Consider the geographic market focus so all resources can be found on a single platform regardless of the resource’s location

Question 8

• CC Collaborative Consumption

Answer 8

the peer-to-peer-based activity of obtaining, giving, or sharing the access to goods and services, coordinated through community-based online services. —> has been expected to alleviate societal problems such as hyper-consumption, pollution, and poverty by lowering the cost of economic coordination within communities.

Question 9

Motives for which people use CC:

Answer 9

• Intrinsic motives: for the enjoyment related to the given activity
  1. Sustainability: for ideology and norms
  2. Enjoyment: enjoyment derived from the activity itself
• Extrinsic motives: motivations are related to external pressures, such as reputation and monetary gain
  3. Reputation: motivation factor in determining participation in communities and other online collaboration activities such as information sharing and open-source projects
  4. Economic benefits: utility maximising behaviour wherein the
  consumer replaces exclusive ownership of goods with lower-cost options from within a CC service
• Attitude: it is investigated as there is a reason to expect a possible discrepancy between
  attitudes and behaviour it is essential to measure them separately

Question 10

THE SHARING ECONOMY: WHY PEOPLE PARTICIPATE IN COLLABORATIVE CONSUMPTION: results

Answer 10

1. Intrinsic motivations are strong determinants of attitude, whereas extrinsic motivations did not reflect positively on attitude
2. For use intention extrinsic motivations were a more prominent predictor along with enjoyment
   from the activity
   —> this indicates a discrepancy between reported attitudes and actual behaviour in this context: Although perceived sustainability positively influences attitudes towards CC, it plays a lesser role when people consider actual participation in CC. While economic benefits (saving money and time) seem to have a significant effect on behavioural intentions but not on attitudes towards CC.

Question 11

CC Problem Crowding out and how to prevent this

Answer 11

Problem: Crowding out: is a phenomenon where extrinsic motivations start over- shadowing the initial intrinsic motivations. —> Although people might have started participating in CC for intrinsic reasons (e.g., because of perceived sustainability), the motivations might have shifted toward extrinsic ones.
Approaches to prevent this:
* Increase intrinsic motivation: increase enjoyment by making participation more pleasurable, communal and supportive of ideological causes
* Impede extrinsic motivations: employment of trust systems that enable participants to formally signal to other users how equally they share or consume or employ systems that would allocate resources evenly with the aim of regulating free riding and preventing excessive economic exploitation of CCs. —> ex. by regulating the ratio of contributions and receivers of favours.