TUILES: Tuesday Informal Lunchtime Seminars Fall 2014
Tuesday, November 11th
KMC 8-170
Lunch will be available at 12:15 pm. The seminar begins at 12:30 pm.
"Peer-to-Peer Rental Markets in a Sharing Economy"
Samuel Fraiberger
We present a new dynamic model of a sharing economy featuring peer-to-peer Internet-enabled rental markets for durable goods in which consumers are heterogeneous in their price sensitivity and asset utilization rates. We use this model to analyze the welfare effects of introducing such a market when consumers may also trade the durable assets they own in (traditional) secondary markets, while transaction costs and depreciation rates vary with self-utilization and rental intensity. We characterize the stationary equilibrium of the model, then calibrate it by combining data about US automobile ownership and usage with 2 years of transaction-level data we have obtained from a large peer-to-peer car rental marketplace. Our calibration allows us to project longer-run welfare and distributional effects. Counterfactual analyses show that peer-to-peer rental markets change the allocation of goods significantly, may diminish asset trade volumes, but increase usage and consumer surplus. The surplus increases are due to higher participation, changes in prices, renting higher quality rather than purchasing lower quality, and purchasing higher quality while covering purchase costs using rental revenue. The current and projected increase in consumer surplus is about three times larger for households in the top decile of the price sensitivity distribution than for households in the bottom decile, which suggests that lower-income consumers will capture the greater fraction of eventual welfare gains from the sharing economy.
Joint work with: Arun Sundararajan