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Increasing Competition through Sharing Economy

Disucss about the Economic Impacts Of Sharing Economy Sustainability.

Sharing economy is a model where different peers of business are connected to each other through a single platform. These sharing economic platforms allow the sellers and the buyers of the market to interact directly with each other without intervention of any intermediaries. The sharing economy has gained effectiveness due to the advancement of the digital communication. There are a number of pros and cons associated with the sharing economy and its operation. The aim of this study is to discuss the impacts of sharing economy considering the theories and the concepts of economics. For the analysis of the study, this paper uses an Australian based organisation named Camplify. Camplify is an Australian based company that connects the camp goers with caravan owners and other camp-related service providers. In this platform, the campers transact directly with the sellers and pay the transaction amount through the website’s payment gateway.

Among the number of positive and negative impacts of sharing economy, increasing competition is the most exemplary. As the theory of economics state that perfectly competitive market contains a lot of buyers and sellers which in turn helps to reduce the price level in the market. According to Cheng (2016), the sharing economic platform which is used by Camplify helps to increase the competition among the sellers of the market so that each individual seller does not enjoy a huge market power. From the theories of perfectly competitive market it is also known that, lack of power over prices makes the seller a price taker rather than a price setter. For example, in the absence of Camplify, the owners of the caravan would have charged different rentals and campers as a consumer would not have found out how much the other caravan owners were charging at the same time. This reduction in the competition would have increased the rentals making the customers of the market worse off. Sundararajan (2016) commented that, prior to the digital advancement or the operation of Camplify, the local owners of caravan enjoyed a monopoly like market where they had the power to set the rental. However, it does not only benefit the buyers of the market with the reduced price of the products and services, it also benefits the sellers as they receive more requests to rent their caravans. Prior to the introduction of Camplify, the local owners of caravans had to depend on the demands of the local campers and communication with campers residing far away would be impossible. The sharing platform has allowed the owners of caravan to enjoy expanded customer base. Consequently, this has also enhanced the powers of the sellers to grow their caravan rental business as well. Zervas et al. (2017) commented that, in the specific market of on-demand caravan, the demand is inelastic and using this concept the sellers have gained despite the decrease in price and the increase in demand. However, one of the negative impacts of sharing based platform is that all the sellers of the market know what the other sellers of the market are charging as rent. Therefore, they can use the signalling in order to increase and control the rent of the caravans. However, this issue is minor as the collusive behaviours can be easily detected by the administrators of the platform.

Impact on Employment Opportunities

The impacts of sharing economic platform such as Camplify on the employment opportunities are subjective. The collaborative consumption model used in the sharing economy, in one hand reduces the employment for some individuals, while on the other hand creates new opportunities for the other. For example, the Camplify abolishes the presence of the intermediaries who previously used to bring campers to the caravan owners and used to take a chunk of money from the industry. The shared platform established by the company now allows the caravan owners to reach out to the campers directly and hence the intermediaries are worse off. However, Meyer and Shaheen (2017) highlighted that, Camplify helped the owners of the caravan to convert their services into full-fledged businesses. The immediate requirements generated by these businesses are the direct employment opportunities generated by the sharing economy. Furthermore, the employment opportunities are also generated through the growth of the businesses themselves. According to the growth theories of economics, increase in the GDP reduces the unemployment. This implies that more economic transaction leads to more employment opportunities. Martin et al. (2015) stated that the employment opportunities through the sharing economy come from the proliferation of transaction. As discussed above, the demand for rental caravan increases due to the sharing economic platform introduced by Camplify. Besides this, indirect means are also there which creates employment opportunities through the operation of the sharing economic platform used by Camplify. These indirect channels are the car service providers and mechanic whose demand also increases along with the use of the caravans.

Resource allocation, in the literature of economics, is known as the management of the resources in such a way that increases the productivity of the overall individual or the organisation. Sharing economic platforms hugely influences the resource allocations of the market. Ranchordás (2015) commented that, prior to the sharing economic platform such as that of Camplify, middlemen used to extract more revenue than the value they generated for the industry and the market. For example, campers before the introduction of Camplify found it hard to search a caravan owner who would rent them his caravan and taking the advantages of this the middlemen used to charge a lot of money from the campers and paid the caravan owners after taking heavy commissions. Consequently, the price level in this industry remained very high and the overall production remained low. This also led to low level of labour requirement and capital requirement as well. Consequently, the allocations of resources were inefficient. However, with the sharing economic structure, resource requirement increased with the proliferation of the transaction in the market. The sellers or the owners of the caravan respond to the increased demand of the market by turning the renting activities into a business attracting and investing a fairly large capital. Koopman et al. (2014) stated that sharing economy has increased the capital investment in the lower level of economy that has strengthened the allocation of resources in the economy. However, critics of sharing economy pointed out that the allocation of resources creates an inequality in the system. Heo (2016) stated that different individual gets different returns and hence inequality sets in. For example, the labours for the maintenance of the caravans get paid same despite the changes in the demand in the markets. In this case, only the owners of the caravans are better off as they enjoy the gains from the trade. As a result of the income of the caravan owners and the labours, support staff has increased after the introduction of the platform.

Resource Allocation

The sharing economic platform transforms the unorganised sector into an organised sector. Prior to the existence of Camplify, the campers interacted with the intermediaries before getting the contact details of the caravan owners. Therefore, any kinds of transaction that used to take place between campers and intermediaries went unproductive. Sharing economy has helped the industry to get formalised and hence it has also impacted on the wages of the labours as well. Martin (2016) highlighted that sharing economic platform runs on the perfect competition which also gets reflected in the corresponding labour market as well. Consequently, the labour markets also behave as a competitive market giving extra power to the business owners. In this case, the caravan owners, despite making huge profits, did not manage to have powers to control the wages of the labours. “Sharing economic platform”, as discussed above, give rise to the number of private ventures at the lowest level of the economy.  Thus, a huge pool of employment opportunity is created through the operation of the platform providing a standardised wage to the labours of the market. However, one of the negative impacts of sharing the economic platform on the wage of the labours is that in some of the sectors it fixes the wages below the subsistence level.

Conclusion

Therefore, sharing an economic platform as used by Camplify has a number of positive and negative impacts on the economy. One of the characteristics of these types of the platform is that it allows the sellers and the buyers separated by large geographical area to come under one place. Consequently, the intermediaries who generated no product for the industry were abolished. Furthermore, the micro industries such as the caravan rental allocated the resources inappropriately which led to low productivity of the sector. The introduction of the sharing economic platform has allowed the resources to work at their potential. However, despite some of the positive impacts, it has also as it pegs the wages of some of the labours in a level lower than their subsistence wage. However, it can easily be mapped that, the positive impacts of the sharing economic platform outweigh the negative impacts.

Reference

Böcker, L. and Meelen, T., 2017. Sharing for people, planet or profit? Analysing motivations for intended sharing economy participation. Environmental Innovation and Societal Transitions, 23, pp.28-39.

Cheng, M., 2016. Sharing economy: A review and agenda for future research. International Journal of Hospitality Management, 57, pp.60-70.

Heo, Y., 2016. Sharing economy and prospects in tourism research. Annals of Tourism Research, 58, pp.166-170.

Koopman, C., Mitchell, M. and Thierer, A., 2014. The sharing economy and consumer protection regulation: The case for policy change. J. Bus. Entrepreneurship & L., 8, p.529.

Martin, C.J., 2016. The sharing economy: A pathway to sustainability or a nightmarish form of neoliberal capitalism?. Ecological Economics, 121, pp.149-159.

Martin, C.J., Upham, P. and Budd, L., 2015. Commercial orientation in grassroots social innovation: Insights from the sharing economy. Ecological Economics, 118, pp.240-251.

Meyer, G. and Shaheen, S. eds., 2017. Disrupting Mobility: Impacts of Sharing Economy and Innovative Transportation on Cities. Springer.

Ranchordás, S., 2015. Does sharing mean caring: Regulating innovation in the sharing economy. Minn. JL Sci. & Tech., 16, p.413.

Richardson, L., 2015. Performing the sharing economy. Geoforum, 67, pp.121-129.

Schor, J., 2016. DEBATING THE SHARING ECONOMY. Journal of Self-Governance & Management Economics, 4(3).

Sundararajan, A., 2016. The sharing economy: The end of employment and the rise of crowd-based capitalism. Mit Press.

Zervas, G., Proserpio, D. and Byers, J.W., 2017. The rise of the sharing economy: Estimating the impact of Airbnb on the hotel industry. Journal of Marketing Research, 54(5), pp.687-705.

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