Consumer-to-Consumer Product Trading With Strategic Consumer Behaviors in the Sharing Economy

Abstract

Technological advancements have led to an increase in the popularity of consumer-to-consumer product trading (C2C-PT). How C2C-PT affects the manufacturer (called the 'firm') and consumers in the market is unclear. We, therefore, build analytical models to explore this problem. We consider a case in which a firm develops and sells a product to consumers in the market. Consumers possess heterogeneous random valuations of the product and are strategic in the sense that they are forward-looking utility maximizers. The firm makes the optimal decision on the product selling price. We study the impacts of C2C-PT on both the firm and consumers. We identify the optimal purchasing decision for the consumers and establish the optimal pricing policy for the firm. We show that the presence of C2C-PT may either benefit or hurt the firm and consumers, while the consumer's strategic behavior will always bring harm to the firm. Most interestingly, we prove that strategic purchasing behavior is not always beneficial to consumers themselves.