Consumer-to-Consumer Digital-Product-Exchange in the Sharing Economy System With Risk Considerations: Will Digital-Product-Developers Suffer?

In the sharing economy system, consumer-to-consumer product-exchange (C2C-PE) for digital products is commonly seen. In this paper, we analytically explore the C2C-PE problem for digital products. To be specific, we consider the presence of a digital product developer (DPD) who develops and sells a product to consumers in the market. Consumers possess random valuation toward the digital product and the DPD needs to decide the optimal selling price for the product. We study the impacts brought by C2C-PE. We try to uncover whether (and when) DPDs and consumers will be benefited by the presence of C2C-PE. In the basic model, when all parties are risk neutral, we find that the presence of C2C-PE is always beneficial to the DPD and consumers. To show the robustness of results in the basic model, we further extend the analysis to cover a few cases and prove that this conclusion holds irrespective of the DPD’s risk averse attitude, the consumers’ risk averse attitude, as well as whether the utility gained from C2C-PE is effort dependent or not. Hence, we conclude that C2C-PE, which seems to be harmful to DPDs, is in fact a beneficial scheme to both the DPDs and consumers.