Is it really different from traditional business?

Executive Summary

What's called the sharing economy—peer-to-peer transactions conducted via the Internet and smartphones—has changed how people arrange car rides, find vacation lodging and more. Revenue is projected to soar in the coming years, although profitability remains untested. But as businesses such as Uber, Lyft and Airbnb flourish, regulation and collection of taxes, primarily by state and local authorities, have become more difficult to enforce. Traditional businesses such as taxis and hotels complain that these newcomers are gaining an unfair advantage by ducking oversight that's meant to protect consumers. Additionally, debate has grown over whether service providers in the sharing economy are independent contractors or employees. Some of the key issues under debate: Is the sharing economy more efficient than traditional markets? Should regulators treat the sharing economy the same way as conventional competitors? Are sharing-economy companies platforms for independent contractors, or are they employers?

Resources

Bibliography

Books

Botsman, Rachel, and Roo Rogers, “What's Mine Is Yours: The Rise of Collaborative Consumption,” HarperCollins, New York, 2010. Botsman, a business consultant, and Rogers, the founder of several sharing-economy companies, trace the roots of the sharing economy and the changes in how people consume goods and services.

Chase, Robin, “Peers Inc: How People and Platforms Are Inventing the Collaborative Economy and Reinventing Capitalism,” PublicAffairs, New York, 2015. Chase, a co-founder of Zipcar, draws on the relatively short history of the sharing economy and explores how it is changing the broader economy.

Stephany, Alex, “The Business of Sharing: Making It in the Sharing Economy,” Palgrave Macmillan, New York, 2015. Stephany, CEO of JustPark, a sharing-economy company in Great Britain, outlines best practices for succeeding in the sharing economy by examining the experiences of his own firm as well as others.

Articles

Asher-Schapiro, Avi, “The Sharing Economy Is Propaganda,” Cato Unbound, Feb. 13, 2015, http://tinyurl.com/o2275be. As part of a multi-author debate on a libertarian website, a journalist who has written about how Uber drivers see their work argues that much of the “sharing economy” is old-fashioned capitalism in disguise.

Badger, Emily, “Airbnb is about to start collecting hotel taxes in more major cities, including Washington,” The Washington Post, Jan. 29, 2015, http://tinyurl.com/nac6kdd. Airbnb agrees to be the tax collector for some cities to ease regulators' concerns about lost revenue.

Benkler, Yochai, “Sharing Nicely: On Shareable Goods and the Emergence of Sharing as a Modality of Economic Production,” Yale Law Journal, 2004, pp. 273–358, http://tinyurl.com/nv384q2. Harvard law professor's thorough analysis was the first real articulation of the modern sharing economy.

Cannon, Sarah, and Lawrence H. Summers, “How Uber and the Sharing Economy Can Win Over Regulators,” Harvard Business Review, Oct. 13, 2014, https://hbr.org/2014/10/how-uber-and-the-sharing-economy-can-win-over-regulators/. A manager at Google Capital (Cannon) and a former Treasury secretary (Summers) offer detailed advice on how sharing-economy companies can get the best treatment from regulators.

Cohen, Boyd, and Jan Kietzmann, “Ride On! Mobility Business Models for the Sharing Economy,” Organization & Environment, Aug. 31, 2014, http://oae.sagepub.com/content/27/3/279. The authors examine shared transportation business models to find the optimal balance between companies and local governments.

Feeney, Matthew, “Level the Playing Field—by Deregulating,” Cato Unbound, Feb. 10, 2015, http://tinyurl.com/onphurf. A policy analyst at the libertarian Cato Institute argues that new technologies have made much regulation counterproductive.

Kelly, Kevin, “We Are the Web,” Wired, August 2005, http://tinyurl.com/p4kjdtj. Wired magazine's founding executive editor offers a fascinating recounting of the development of the technologies that power the sharing economy.

Shafroth, Frank, “The Unforeseen Fiscal Challenges of Uber-Like Services,” Governing, March 20, 2015, http://tinyurl.com/pmh3mlj. The director of the Center for State and Local Government Leadership at George Mason University illuminates the challenges the sharing economy poses for government.

Sundararajan, Arun, “A Safety Net Fit for the Sharing Economy,” Financial Times, June 22, 2015, http://tinyurl.com/qclxwu8. A professor of information, operations and management sciences at New York University's Stern School of Business argues that benefits such as health coverage, worker's compensation and paid vacations should be available to sharing-economy workers.

Reports and Studies

“Alternative Financial Services: A Primer,” FDIC Quarterly, April 27, 2009, http://tinyurl.com/p643omd. Report from the Federal Deposit Insurance Corp. explains how alternative financial services work, including peer-to-peer lending, and how the services interact.

Krueger, Alan B., and Jonathan V. Hall, “An Analysis of the Labor Market for Uber's Driver-Partners in the United States,” Working Paper #587, Princeton University, Jan. 22, 2015, http://tinyurl.com/n5norw8. A Princeton economist (Krueger) and Uber's head of policy analysis (Hall) examine Uber data and find mostly positive effects for communities and employees.

Schneiderman, Eric T., “Airbnb in the City,” New York State Office of the Attorney General, Oct. 14, 2014, http://tinyurl.com/m8pqffb. Report lays out the New York government's case against Airbnb, finding the rental activities supported by the platform frequently violate state laws and harm communities.

The Next Step

Niche Markets

Goel, Vindu, “Start-Ups Clamor to Be the Airbnb of Boats,” The New York Times, June 10, 2015, http://tinyurl.com/ndy7hu3. Boat owners find a niche market in peer-to-peer boat rentals, but face new challenges due to insurance and safety requirements.

Sharam, Andrea, and Lyndall Bryant, “An Uber for apartments could solve some common housing problems,” The Conversation, July 20, 2015, http://tinyurl.com/p2wy2v4. Two-sided matching markets, commonly used in the sharing economy, could create a housing market that encourages quality and affordability by pairing consumers with developers.

Zhuo, Tx, “5 Lessons Entrepreneurs Can Learn From Niche Marketplaces,” Entrepreneur, May 14, 2015, http://tinyurl.com/nj9ltuu. Successful niche markets employ multiple tools, including partnerships with potential competitors, specialized services and an interest in consumer needs.

Regulation

Badger, Emily, “Who millennials trust, and don't trust, is driving the new economy,” The Washington Post, April 16, 2015, http://tinyurl.com/p9hjp78. While trust in individuals has declined over the past 40 years, trust in crowds has increased, allowing for the rise of an industry with fewer regulations, according to a survey by PricewaterhouseCooper.

Peltz, Jennifer, “Cities keen on ‘sharing economy’ but concerned about safety,” The Associated Press, June 3, 2015, http://tinyurl.com/pqsok5y. Officials in U.S. cities support growth in the sharing sector, but question the safety of an unregulated industry, according to a National League of Cities survey.

Popper, Ben, “Uber can't be stopped. So what's next?” The Verge, July 27, 2015, http://tinyurl.com/ppvl35j. New York City becomes the latest locale to try to regulate Uber, but fail.

Technology

Bahceli, Yoruk, “Netherlands to make room in rules to stimulate ‘sharing economy,’” Reuters, July 20, 2015, http://tinyurl.com/ou9xobv. Officials in the Netherlands are adapting rules to meet the demands of new services, promising “technology-neutral” regulations that will not discriminate against less-savvy companies.

Howard, Alex, “Open data, crowdsourcing, and sharing economy tech take on new roles in disasters,” Tech Republic, Aug. 8, 2015, http://tinyurl.com/q56uomg. Some peer-to-peer companies are attempting to expand services to crisis response, offering “disaster technology” to those seeking information, aid and even housing during emergencies.

Kerr, Dara, “‘Sharing economy’ apps to boom with their lure of cheap and easy,” CNET, April 14, 2015, http://tinyurl.com/p7alnxb. User-friendly apps and simple digital transactions help to engage a growing number of customers and entrepreneurs in the sharing economy.

Worker Treatment

Lapowsky, Issie, “A Sharing Economy Star Shuts Down As Labor Issues Simmer,” Wired, July 17, 2015, http://tinyurl.com/ovqkeug. One start-up specializing in home cleaning services closed after failing to supply workers with basic benefits.

Macmillan, Douglas, “Sharing Economy Workers Need ‘Safety Net,’ U.S. Senator Says,” The Wall Street Journal, June 8, 2015, http://tinyurl.com/ngn4xcj. Sen. Mark Warner, D-Va., is calling for new programs that would protect independent contractors in the United States, providing insurance and other basic employee benefits to freelance workers.

Manjoo, Farhad, “Start-Ups Finding the Best Employees Are Actually Employed,” The New York Times, June 24, 2015, http://tinyurl.com/q46u73l. One tech company classifies its workers as employees, not contractors, arguing that valued employees provide better service.

Organizations

Airbnb
888 Brannan St., San Francisco, CA 94103
415-800-5959
www.airbnb.com
Company that provides a platform for peer-to-peer rentals of living spaces.

Cato Institute
1000 Massachusetts Ave., N.W., Washington, DC 20001-5403
202-842-0200
www.cato.org
Libertarian think tank that explores the impact of government policies, including regulation.

Center for Economic and Policy Research
1611 Connecticut Ave., N.W., Suite 400, Washington, DC 20009
202-293-5380
www.cepr.net
Think tank that focuses on the effects of economic policies.

Federal Trade Commission
600 Pennsylvania Ave., N.W., Washington, DC 20580
202-326-2222
www.ftc.gov
The U.S. commission that is charged with preventing business practices considered anticompetitive, deceptive or unfair to consumers.

Lyft
2300 Harrison St., San Francisco, CA 94110-2013
866-292-2713
www.lyft.com
Company that offers on-demand transportation network services.

Mercatus Center, George Mason University
3434 Washington Blvd., 4th Floor, Arlington, VA 22201-4508
703-993-4930
www.mercatus.org
Describes itself as “the world's premier university source for market-oriented ideas—bridging the gap between academic ideas and real-world problems.”

Property Casualty Insurers Association of America
8700 W. Bryn Mawr, Suite 1200S, Chicago, IL 60631-3512
847-297-7800
www.pciaa.net
Trade association for property casualty insurers.

Uber
1455 Market St., 4th Floor, San Francisco, CA 94103
877-223-8023
www.uber.com
Company that offers on-demand transportation network services.

DOI: 10.1177/2374556815601429