Study Of How Consumers Sharing Products Affects Firms’ Operations Decisions

Rapid development of the sharing economy combined with traditional supply chain, had a major impact on production and consumer decisions. We built a two-stage consumption model which consisting of a firm, consumers and a third-party sharing platform. The product life-cycle is divided into two stages and a consumer who purchased the product can derive different use values across different usage periods and can rent out her purchased product through a third-party sharing platform. The firm produces and sales one product, and strategically decide product price and quality at the beginning of the first stage. The third-party sharing platform provides services to consumers who share products each other and will charge the platform fees by a certain standard. In the consumption process, consumers can only decide whether to buy the product in the early phase, but can decide whether to lease or rent products at the beginning of each period. We will study how the consumer-to-consumer sharing of products affects the traditional supply chain consisting of producers and consumers, how the consumer-to-consumer sharing market affects consumers’decisions making, and what impact sharing markets play on corporate profits.Our study found that sharing market size will be smaller with the increase of the third-party platform charge rate when a sharing market exists. Secondly, there is a sharing market and the market is equilibrium, the firm optimal price is monotonically decreasing on third-party platform percentage fee. Thirdly, the firm optimal profits will be monotonically decreasing on the third-party platform percentage fee.Compared with the case when there is no product-sharing market, we found that when a sharing market exists the firm will charge a higher retail price and the retail price will decrease and tend to the price without sharing market with the increase of the third-party platform percentage fee. Secondly, the product-sharing market will hurt the firm if its unit cost is low enough but will benefit the firm if its unit cost is high when the third-party platform percentage fee is relatively low. But the product-sharing market will always benefit the firm when the third-party platform percentage fee is high.