Posted in Finance, Accounting and Economics Terms, Total Reads: 553
Definition: Sharing Economy
Sharing Economy/peer-to-peer economy/collaborative economy is one in which people who possess assets or goods, share it with other individuals during times the goods are not utilized by them. The sharing is done for a fee, which is the rental charge for the owner of the asset.
With the advent of the Internet, sharing economy has boomed worldwide. Whenever a good is underutilized/temporarily unutilized by an individual, he/she advertises about the good on a sharing portal that helps individuals who are on the lookout for the good take it on a rental basis. Through such a system, physical goods are shared as services and overall utilization in the economy improves. Sharing economy is seen maximum in case of expensive items that are underutilized. Rooms and cars form a significant percentage of sharing economy examples.
Advantages and Disadvantages:
Sharing economy has social as well as environmental benefits. Sharing lets people meet new individuals and it facilitates social ties. At the same time, sharing also reduces number of assets on the planet because people tend to rent assets instead of buying/owning them.
However, the main disadvantage with sharing economy is that of regulatory uncertainty. When individuals share goods on rental business, they may tend to avoid taxes on such income. Also, because such rentals are not run in the form of a proper business, the costs of renting for the owner is less, which helps him/her price the assets cheaper for rentals. This can act as adverse competition for established legal rental service companies.