Carmen Arguedas
Universidad Autónoma de Madrid, Spain
Dynamic Games and Applications Seminar
Peer-to-Peer Sharing, Price Competition, and Consumers’ Awareness
Oct 9, 2025 11:00 AM — 12:00 PM (Montreal time)
Zoom webinar link
In this paper, we present a model of product differentiation where two firms can offer either a standard or a circular version of a product. The latter refers to a version of the good that can be shared in a peer-to-peer sharing platform. Consumers are heterogeneous concerning the amount of time they use the goods for themselves and can end up being either consumers of the standard product, or prosumers or users of the circular product. We characterize the equilibrium for given degree of maturity of the sharing market, maximum consumers’ use intensity and marginal cost differences between the two varieties. Key to our results is whether consumers care for circularity. In the absence of environmental awareness, there is very little space for the circular product when coexisting with a standard variety: the circular good is more expensive, it has a lower market share, and results in lower, albeit positive, profits. Things change dramatically if consumers experience bad conscience when purchasing the standard version: the circular product continues to be more expensive, but it may beat the standard one in market share and profits. This can even result in the two firms offering the circular variety in equilibrium. Our findings suggest that consumers’ environmental awareness can be a key driver for the transition towards the circular economy.
(With F. André, C. Ranocchia and S. Rousseau).