Accessible Requires Authentication Published by De Gruyter May 11, 2019

The Power of the Crowd in the Sharing Economy

Michal S. Gal

Abstract

Much has been written on the ability of sharing platforms to affect market conditions. In this research we focus on another piece of the puzzle, which is often overlooked but can play a significant role in shaping market structure and conduct: the users of the platform – whether suppliers or consumers (hereinafter jointly or severally: “the crowd”). As will be shown, the power of the crowd can both positively and negatively affect social welfare. Accordingly, this paper seeks to recognize the effects of crowd power and to identify both market-based as well as regulatory solutions to increase its welfare-increasing qualities, while reducing its negative ones.

To do so, the study develops in a three stages. The first part explores the welfare effects of the sharing economy on the crowd. This serves as a basis for the second part, which focuses on the role of the crowd in shaping sharing platform markets. The third part then explores the potential role, as well as the limitations, of regulation in ensuring that crowd actions increase welfare. As will be shown, the current legal framework which regulates crowd actions might limit the realization of some of the potential positive effects of social platforms. In particular, new thinking might be needed with regard to rules regulating the use of crowd power to counteract a dominant sharing platform’s market power.

Acknowledgements

I would like to thank Lior Frank, Tamar Indig, Chen Komisar, Talia Goldshtain, and Lior Shachar for most helpful research assistance, and Ido Baum, Orit Fishman-Afori, Iris Soroker, the editorial board of this journal and its external anonymous reviewer, and participants in two conferences on the sharing economy for excellent comments on prior parts of the research. This research was supported by the Meir Chet Center for Competition and Regulation. Any mistakes or omissions remain the author’s. Image taken from https://trainingmag.com/trgmag-article/leveraging-crowd-power.

Published Online: 2019-05-11
Published in Print: 2019-05-27

© 2019 Walter de Gruyter GmbH, Berlin/Boston