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Open AccessOpen Access JUSTC Management 22 November 2022

Entry or not? Manufacturers’ product sharing strategy when facing competition

  • 1.

    Anhui Province Key Laboratory of Contemporary Logistics and Supply Chain, International Institute of Finance, School of Management, University of Science and Technology of China, Hefei 230026, China

  • 2.

    Macao Institute for Tourism Studies, Macau 999078, China

  • 3.

    School of Economics, Hefei University of Technology, Hefei 230601, China

Cite this:
https://doi.org/10.52396/JUSTC-2022-0110
More Information
  • Author Bio:

    Xiaolong Guo is an Associate Professor at the School of Management, University of Science and Technology of China (USTC). He received his Ph.D. degree from the USTC in 2014. His research interests include service operations management, supply chain management, and emerging business models (e.g., crowdfunding, sharing economy, and platform economy). His work has been published in Manufacturing & Service Operations Management, Production and Operations Management, Journal of Management Information Systems, Service Science, European Journal of Operational Research, and other journals

    Chenchen Yang received her Ph.D. degree in Management Science and Engineering from the University of Science and Technology of China in 2012. Currently, she is a Lecturer at the School of Economics, Hefei University of Technology. Her research interests include operations management, decision science, DEA and performance evaluation. Her work has been published in Research Policy, Tourism Management, European Journal of Operational Research, and other journals

  • Corresponding author: E-mail: yangcc@hfut.edu.cn
  • Received Date: 05 August 2022
  • Accepted Date: 28 September 2022
    • Available Online: 22 November 2022
    Abstract

  • Abstract

    Traditional manufacturers can take part in the sharing economy by renting products to consumers through sharing platforms. We develop an analytical framework consisting of two manufacturers and a sharing platform to study the effect of product sharing on competing manufacturers’ entry and pricing strategies. On the one hand, when the high-quality manufacturer works with the sharing platform, if the perceived quality of renting the high-quality product is larger than that of purchasing the low-quality product, it shows that the high-quality manufacturer will benefit and should enter the sharing market when the rental price is moderate. However, if the perceived quality of renting a high-quality product is smaller than that of purchasing a low-quality product, both manufacturers will always suffer losses; thus, the high-quality manufacturer should not provide sharing. Consequently, when the high-quality manufacturer chooses to share, the quality advantage should be maintained. On the other hand, when the low-quality manufacturer works with the sharing platform, it also finds that the low-quality manufacturer will always be better off from a moderate rental price. This implies that the low-quality OEM has more interest in offering product sharing if the perceived quality of renting high-quality product is smaller than that of purchasing low-quality product.

    Graphical abstract

    Manufacturers’ product sharing strategies.

    Abstract

    Traditional manufacturers can take part in the sharing economy by renting products to consumers through sharing platforms. We develop an analytical framework consisting of two manufacturers and a sharing platform to study the effect of product sharing on competing manufacturers’ entry and pricing strategies. On the one hand, when the high-quality manufacturer works with the sharing platform, if the perceived quality of renting the high-quality product is larger than that of purchasing the low-quality product, it shows that the high-quality manufacturer will benefit and should enter the sharing market when the rental price is moderate. However, if the perceived quality of renting a high-quality product is smaller than that of purchasing a low-quality product, both manufacturers will always suffer losses; thus, the high-quality manufacturer should not provide sharing. Consequently, when the high-quality manufacturer chooses to share, the quality advantage should be maintained. On the other hand, when the low-quality manufacturer works with the sharing platform, it also finds that the low-quality manufacturer will always be better off from a moderate rental price. This implies that the low-quality OEM has more interest in offering product sharing if the perceived quality of renting high-quality product is smaller than that of purchasing low-quality product.

    • Public Summary

    • An analytical framework is developed to study the entry strategy of manufacturers to the sharing market facing competition.
    • We identify whether and when manufacturers should enter the sharing market.
    • The high-quality manufacturer should maintain a quality advantage once it chooses to share; otherwise, it is likely to enter the trouble of lose‒lose.
    • The low-quality manufacturer will be more interested in offering product sharing when product difference or the sharing platform’s service level is low.

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    • References(37)
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    Belk R. You are what you can access: Sharing and collaborative consumption online. Journal of Business Research, 2014, 67 (8): 1595–1600. doi: 10.1016/j.jbusres.2013.10.001
    [2]
    Si S, Chen H, Liu W, et al. Disruptive innovation, business model and sharing economy: the bike-sharing cases in China. Management Decision, 2020, 59 (11): 2674–2692. doi: 10.1108/MD-06-2019-0818
    [3]
    Cheng M. Sharing economy: A review and agenda for future research. International Journal of Hospitality Management, 2016, 57: 60–70. doi: 10.1016/j.ijhm.2016.06.003
    [4]
    Leung X Y, Xue L, Wen H. Framing the sharing economy: Toward a sustainable ecosystem. Tourism Management, 2019, 71: 44–53. doi: 10.1016/j.tourman.2018.09.021
    [5]
    Martin C J. The sharing economy: A pathway to sustainability or a nightmarish form of neoliberal capitalism? Ecological Economics, 2016, 121: 149–159. doi: 10.1016/j.ecolecon.2015.11.027
    [6]
    PwC. The sharing economy: How will it disrupt your business? Megatrends: the collisions. 2014. https://liye.info/doc-viewer. Accessed 1 June 2022.
    [7]
    Jiang B, Tian L. Collaborative consumption: Strategic and economic implications of product sharing. Management Science, 2018, 64 (3): 1171–1188. doi: 10.1287/mnsc.2016.2647
    [8]
    Fraiberger S, Sundararajan A. Peer-to-peer rental markets in the sharing economy. SSRN Electronic Journal, 2015: ssrn.2574337. doi: 10.2139/ssrn.2574337
    [9]
    Zervas G, Proserpio D, Byers J W. The rise of the sharing economy: Estimating the impact of Airbnb on the hotel industry. Journal of Marketing Research, 2017, 54 (5): 687–705. doi: 10.1509/jmr.15.0204
    [10]
    Agrawal V V, Bellos I. The potential of servicizing as a green business model. Management Science, 2017, 63 (5): 1545–1562. doi: 10.1287/mnsc.2015.2399
    [11]
    Zhang Y, Huang M, Tian L, et al. Build or join a sharing platform? The choice of manufacturer’s sharing mode. International Journal of Production Economics, 2021, 231: 107811. doi: 10.1016/j.ijpe.2020.107811
    [12]
    Abhishek V, Guajardo J A, Zhang Z. Business models in the sharing economy: Manufacturing durable goods in the presence of peer-to-peer rental markets. Information Systems Research, 2021, 32 (4): 1450–1469. doi: 10.1287/isre.2021.1034
    [13]
    Gilbert S M, Randhawa R S, Sun H. Optimal per-use rentals and sales of durable products and their distinct roles in price discrimination. Production and Operations Management, 2014, 23 (3): 393–404. doi: 10.1111/poms.12050
    [14]
    Pei J, Yan P, Kumar S, et al. How to react to internal and external sharing in B2C and C2C. Production and Operations Management, 2020, 30 (1): 145–170. doi: 10.1111/poms.13189
    [15]
    Jiang Z Z, Kong G, Zhang Y. Making the most of your regret: Workers’ relocation decisions in on-demand platforms. Manufacturing & Service Operations Management, 2021, 23 (3): 695–713. doi: 10.1287/msom.2020.0916
    [16]
    Li H, Srinivasan K. Competitive dynamics in the sharing economy: An analysis in the context of Airbnb and hotels. Marketing Science, 2019, 38 (3): 365–391. doi: 10.1287/mksc.2018.1143
    [17]
    He L, Mak H Y, Rong Y, et al. Service region design for urban electric vehicle sharing systems. Manufacturing & Service Operations Management, 2017, 19 (2): 309–327. doi: 10.1287/msom.2016.0611
    [18]
    Jacob J, Roet-Green R. Ride solo or pool: Designing price-service menus for a ride-sharing platform. European Journal of Operational Research, 2021, 295 (3): 1008–1024. doi: 10.1016/j.ejor.2021.03.058
    [19]
    Xu X, Zeng S, He Y. The impact of information disclosure on consumer purchase behavior on sharing economy platform Airbnb. International Journal of Production Economics, 2021, 231: 107846. doi: 10.1016/j.ijpe.2020.107846
    [20]
    Choi T M, He Y Y. Peer-to-peer collaborative consumption for fashion products in the sharing economy: Platform operations. Transportation Research Part E: Logistics and Transportation Review, 2019, 126: 49–65. doi: 10.1016/j.tre.2019.03.016
    [21]
    Hu M, Zhou Y. Price, wage, and fixed commission in on-demand matching. SSRN Electronic Journal, 2017: ssrn.2949513. doi: 10.2139/ssrn.2949513
    [22]
    Benjaafar S, Bernhard H, Courcoubetis C, et al. Drivers, riders, and service providers: The impact of the sharing economy on mobility. Management Science, 2022, 68 (1): 123–142. doi: 10.1287/mnsc.2020.3909
    [23]
    Benjaafar S, Kong G, Li X, et al. Peer-to-peer product sharing: Implications for ownership, usage, and social welfare in the sharing economy. Management Science, 2019, 65 (2): 477–493. doi: 10.1287/mnsc.2017.2970
    [24]
    Fang Z, Huang L, Wierman A. Prices and subsidies in the sharing economy. Performance Evaluation, 2019, 136: 102037. doi: 10.1016/j.peva.2019.102037
    [25]
    Gal-Or E. How does competition among lodging sharing platforms affect welfare and profits. Journal of Economics & Management Strategy, 2021, 30 (1): 45–62. doi: 10.1111/jems.12397
    [26]
    Bian Y W, Cui Y T, Yan S, et al. Optimal strategy of a customer-to-customer sharing platform: Whether to launch its own sharing service. Transportation Research Part E: Logistics and Transportation Review, 2021, 149: 102288. doi: 10.1016/j.tre.2021.102288
    [27]
    Guo H, Yang C, Liu B, et al. Performance-based contracts in the sharing economy: A supply chain framework with application of Internet of Things. Annals of Operations Research, 2021: doi 10.1007/s10479-021-04144-7. doi: 10.1007/s10479-021-04144-7
    [28]
    Tian L, Jiang B, Xu Y. Manufacturer’s entry in the product-sharing market. Manufacturing & Service Operations Management, 2021, 23 (3): 553–568. doi: 10.1287/msom.2020.0919
    [29]
    Bellos I, Ferguson M, Toktay L B. The car sharing economy: Interaction of business model choice and product line design. Manufacturing & Service Operations Management, 2017, 19 (2): 185–201. doi: 10.1287/msom.2016.0605
    [30]
    Roma P, Panniello U, Lo Nigro G. Sharing economy and incumbents’ pricing strategy: The impact of Airbnb on the hospitality industry. International Journal of Production Economics, 2019, 214: 17–29. doi: 10.1016/j.ijpe.2019.03.023
    [31]
    Dai B, Nu Y. Pricing and capacity allocation strategies: Implications for manufacturers with product sharing. Naval Research Logistics, 2020, 67 (3): 201–222. doi: 10.1002/nav.21898
    [32]
    Yu Y G, Dong Y X, Guo X L. Pricing for sales and per-use rental services with vertical differentiation. European Journal of Operational Research, 2018, 270 (2): 586–598. doi: 10.1016/j.ejor.2018.03.035
    [33]
    Wang X, Ng C T, Dong C W. Implications of peer-to-peer product sharing when the selling firm joins the sharing market. International Journal of Production Economics, 2020, 219: 138–151. doi: 10.1016/j.ijpe.2019.05.016
    [34]
    Li Y J, Bai X M, Xue K L. Business modes in the sharing economy: How does the OEM cooperate with third-party sharing platforms. International Journal of Production Economics, 2020, 221: 107467. doi: 10.1016/j.ijpe.2019.08.002
    [35]
    Bacchiega E, Bonroy O. On the benefits of contractual inefficiency in quality-differentiated markets. Oxford Economic Papers, 2015, 67 (3): 846–863. doi: 10.1093/oep/gpv005
    [36]
    Li H, Cui N F, Xu X H. Dual-channel supply chain with manufacturer competition. Journal of Systems Engineering, 2017, 32 (4): 535–546. doi: 10.13383/j.cnki.jse.2017.04.010
    [37]
    Cervero R, Golub A, Nee B. City CarShare: Longer-term travel demand and car ownership impacts. Transportation Research Record: Journal of the Transportation Research Board, 2007, 1992 (1): 70–80. doi: 10.3141/1992-09
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    Figure  1.  Structure of different modes.

    Figure  2.  Possible scenarios of consumer segmentations in mode SBH.

    Figure  3.  Conditions for the existence of rental demand in mode SBH.

    Figure  4.  Conditions for the existence of rental demand in mode SBL.

    Figure  5.  Impact of sharing in mode SBH ( $ \beta {q}_{1} > {q}_{2} $ ).

    Figure  6.  Impact of sharing in mode SBH ( $ \beta {q}_{1} < {q}_{2} $ ).

    Figure  7.  Impact of sharing in mode SBL.

    Figure  8.  OEMs’ profit comparisons in modes SBH and SBL when $ \beta {q}_{1} > {q}_{2} $ .

    [1]
    Belk R. You are what you can access: Sharing and collaborative consumption online. Journal of Business Research, 2014, 67 (8): 1595–1600. doi: 10.1016/j.jbusres.2013.10.001
    [2]
    Si S, Chen H, Liu W, et al. Disruptive innovation, business model and sharing economy: the bike-sharing cases in China. Management Decision, 2020, 59 (11): 2674–2692. doi: 10.1108/MD-06-2019-0818
    [3]
    Cheng M. Sharing economy: A review and agenda for future research. International Journal of Hospitality Management, 2016, 57: 60–70. doi: 10.1016/j.ijhm.2016.06.003
    [4]
    Leung X Y, Xue L, Wen H. Framing the sharing economy: Toward a sustainable ecosystem. Tourism Management, 2019, 71: 44–53. doi: 10.1016/j.tourman.2018.09.021
    [5]
    Martin C J. The sharing economy: A pathway to sustainability or a nightmarish form of neoliberal capitalism? Ecological Economics, 2016, 121: 149–159. doi: 10.1016/j.ecolecon.2015.11.027
    [6]
    PwC. The sharing economy: How will it disrupt your business? Megatrends: the collisions. 2014. https://liye.info/doc-viewer. Accessed 1 June 2022.
    [7]
    Jiang B, Tian L. Collaborative consumption: Strategic and economic implications of product sharing. Management Science, 2018, 64 (3): 1171–1188. doi: 10.1287/mnsc.2016.2647
    [8]
    Fraiberger S, Sundararajan A. Peer-to-peer rental markets in the sharing economy. SSRN Electronic Journal, 2015: ssrn.2574337. doi: 10.2139/ssrn.2574337
    [9]
    Zervas G, Proserpio D, Byers J W. The rise of the sharing economy: Estimating the impact of Airbnb on the hotel industry. Journal of Marketing Research, 2017, 54 (5): 687–705. doi: 10.1509/jmr.15.0204
    [10]
    Agrawal V V, Bellos I. The potential of servicizing as a green business model. Management Science, 2017, 63 (5): 1545–1562. doi: 10.1287/mnsc.2015.2399
    [11]
    Zhang Y, Huang M, Tian L, et al. Build or join a sharing platform? The choice of manufacturer’s sharing mode. International Journal of Production Economics, 2021, 231: 107811. doi: 10.1016/j.ijpe.2020.107811
    [12]
    Abhishek V, Guajardo J A, Zhang Z. Business models in the sharing economy: Manufacturing durable goods in the presence of peer-to-peer rental markets. Information Systems Research, 2021, 32 (4): 1450–1469. doi: 10.1287/isre.2021.1034
    [13]
    Gilbert S M, Randhawa R S, Sun H. Optimal per-use rentals and sales of durable products and their distinct roles in price discrimination. Production and Operations Management, 2014, 23 (3): 393–404. doi: 10.1111/poms.12050
    [14]
    Pei J, Yan P, Kumar S, et al. How to react to internal and external sharing in B2C and C2C. Production and Operations Management, 2020, 30 (1): 145–170. doi: 10.1111/poms.13189
    [15]
    Jiang Z Z, Kong G, Zhang Y. Making the most of your regret: Workers’ relocation decisions in on-demand platforms. Manufacturing & Service Operations Management, 2021, 23 (3): 695–713. doi: 10.1287/msom.2020.0916
    [16]
    Li H, Srinivasan K. Competitive dynamics in the sharing economy: An analysis in the context of Airbnb and hotels. Marketing Science, 2019, 38 (3): 365–391. doi: 10.1287/mksc.2018.1143
    [17]
    He L, Mak H Y, Rong Y, et al. Service region design for urban electric vehicle sharing systems. Manufacturing & Service Operations Management, 2017, 19 (2): 309–327. doi: 10.1287/msom.2016.0611
    [18]
    Jacob J, Roet-Green R. Ride solo or pool: Designing price-service menus for a ride-sharing platform. European Journal of Operational Research, 2021, 295 (3): 1008–1024. doi: 10.1016/j.ejor.2021.03.058
    [19]
    Xu X, Zeng S, He Y. The impact of information disclosure on consumer purchase behavior on sharing economy platform Airbnb. International Journal of Production Economics, 2021, 231: 107846. doi: 10.1016/j.ijpe.2020.107846
    [20]
    Choi T M, He Y Y. Peer-to-peer collaborative consumption for fashion products in the sharing economy: Platform operations. Transportation Research Part E: Logistics and Transportation Review, 2019, 126: 49–65. doi: 10.1016/j.tre.2019.03.016
    [21]
    Hu M, Zhou Y. Price, wage, and fixed commission in on-demand matching. SSRN Electronic Journal, 2017: ssrn.2949513. doi: 10.2139/ssrn.2949513
    [22]
    Benjaafar S, Bernhard H, Courcoubetis C, et al. Drivers, riders, and service providers: The impact of the sharing economy on mobility. Management Science, 2022, 68 (1): 123–142. doi: 10.1287/mnsc.2020.3909
    [23]
    Benjaafar S, Kong G, Li X, et al. Peer-to-peer product sharing: Implications for ownership, usage, and social welfare in the sharing economy. Management Science, 2019, 65 (2): 477–493. doi: 10.1287/mnsc.2017.2970
    [24]
    Fang Z, Huang L, Wierman A. Prices and subsidies in the sharing economy. Performance Evaluation, 2019, 136: 102037. doi: 10.1016/j.peva.2019.102037
    [25]
    Gal-Or E. How does competition among lodging sharing platforms affect welfare and profits. Journal of Economics & Management Strategy, 2021, 30 (1): 45–62. doi: 10.1111/jems.12397
    [26]
    Bian Y W, Cui Y T, Yan S, et al. Optimal strategy of a customer-to-customer sharing platform: Whether to launch its own sharing service. Transportation Research Part E: Logistics and Transportation Review, 2021, 149: 102288. doi: 10.1016/j.tre.2021.102288
    [27]
    Guo H, Yang C, Liu B, et al. Performance-based contracts in the sharing economy: A supply chain framework with application of Internet of Things. Annals of Operations Research, 2021: doi 10.1007/s10479-021-04144-7. doi: 10.1007/s10479-021-04144-7
    [28]
    Tian L, Jiang B, Xu Y. Manufacturer’s entry in the product-sharing market. Manufacturing & Service Operations Management, 2021, 23 (3): 553–568. doi: 10.1287/msom.2020.0919
    [29]
    Bellos I, Ferguson M, Toktay L B. The car sharing economy: Interaction of business model choice and product line design. Manufacturing & Service Operations Management, 2017, 19 (2): 185–201. doi: 10.1287/msom.2016.0605
    [30]
    Roma P, Panniello U, Lo Nigro G. Sharing economy and incumbents’ pricing strategy: The impact of Airbnb on the hospitality industry. International Journal of Production Economics, 2019, 214: 17–29. doi: 10.1016/j.ijpe.2019.03.023
    [31]
    Dai B, Nu Y. Pricing and capacity allocation strategies: Implications for manufacturers with product sharing. Naval Research Logistics, 2020, 67 (3): 201–222. doi: 10.1002/nav.21898
    [32]
    Yu Y G, Dong Y X, Guo X L. Pricing for sales and per-use rental services with vertical differentiation. European Journal of Operational Research, 2018, 270 (2): 586–598. doi: 10.1016/j.ejor.2018.03.035
    [33]
    Wang X, Ng C T, Dong C W. Implications of peer-to-peer product sharing when the selling firm joins the sharing market. International Journal of Production Economics, 2020, 219: 138–151. doi: 10.1016/j.ijpe.2019.05.016
    [34]
    Li Y J, Bai X M, Xue K L. Business modes in the sharing economy: How does the OEM cooperate with third-party sharing platforms. International Journal of Production Economics, 2020, 221: 107467. doi: 10.1016/j.ijpe.2019.08.002
    [35]
    Bacchiega E, Bonroy O. On the benefits of contractual inefficiency in quality-differentiated markets. Oxford Economic Papers, 2015, 67 (3): 846–863. doi: 10.1093/oep/gpv005
    [36]
    Li H, Cui N F, Xu X H. Dual-channel supply chain with manufacturer competition. Journal of Systems Engineering, 2017, 32 (4): 535–546. doi: 10.13383/j.cnki.jse.2017.04.010
    [37]
    Cervero R, Golub A, Nee B. City CarShare: Longer-term travel demand and car ownership impacts. Transportation Research Record: Journal of the Transportation Research Board, 2007, 1992 (1): 70–80. doi: 10.3141/1992-09
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