Abstract
Facilitated by various online platforms, costs of sharing and selling used products have become almost zero. This phenomenon has created new economic competition between new product sellers and those offering shared and used products. In this research, we study the economic ramifications of a monopolistic provider’s self-cannibalization problem when the products in the secondary market can re-enter the market to compete with the product in the primary market. We consider a two-stage game in which a provider sells new products in the market in both stages and used products may enter the market in the form of shared and used goods in the second stage. The model considers the unique characteristics of a sharing market including the market clearance state and the minimum participation conditions for both decentralised and centralised sharers. We identify the market equilibrium of this two-stage game and provide managerial implications in different types of product markets that are represented by automobiles (with value depreciation) and real estate (with value appreciation). We show that despite the many similarities between Airbnb and Uber, value appreciation and depreciation imply very different competition scenarios. Our results highlight the dynamics of price/quantity equilibria in various product-market setups and provide managerial insights for providers of durable goods.