What does the sharing economy bring to the traditional economy?

We can accomplish more by sharing” by opensourceway is licensed under CC BY-SA 2.0.

What does the sharing economy bring to the traditional economy?


In the past few decades, the internet world ushered into a new era WEB2.0 which the online allows users to contribute content and connect with each other (Huang et al., 2015). As well as the rapidly growing sharing economy has benefited and relied on the characterizing of WEB2.0 (Belk, 2014). The sharing economy which is the digitized platform for peer-to-peer exchanges already spread into different industries of the economy. However, the brand-new and innovative operating mode of the sharing economy definitely would create and bring different results and effects for the traditional economy. This essay will discuss what the sharing economy brings to the traditional economy.

Benefits of the Sharing Economy

Individual perspective

According to Forbes, it has been anticipated that the money generated by the sharing economy, which is directly received by individuals, is projected to approach $3.5 billion, with a growth rate of 25% (Geron, 2016). Platforms such as Uber and Airbnb provide individuals with flexible job options, supplementary sources of income, and avenues for entrepreneurial pursuits. According to the UBER market analysis, the platform has given flexible earning options to a total of over 725,000 drivers and delivery partners (Uber, 2022).

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On the other hand, the high barrier of entry which is built by the presence of substantial capital investment in traditional enterprises typically serves as a deterrent for several prospective entrants. The sharing economy enables individuals or small collectives to utilize current resources in order to effectively compete with larger organizations. The presence of additional market participants leads to a trend in competitive dynamics. Ride-hailing services such as Uber and accommodation-sharing platforms like Airbnb employ dynamic pricing strategies that are contingent upon fluctuations in demand and supply (Symson, 2023). Dynamic pricing might potentially provide advantages to customers by reducing costs during periods of less demand. The escalation of competition fosters a greater array of options for consumers, frequently resulting in more competitive pricing.

Corporation perspective

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Digital platforms play a crucial role in facilitating the functioning of the sharing economy by offering the essential facilities and tools required for its operation. The digital characteristics that digital platforms have afford the sharing corporations a notable degree of flexibility and adaptability, which is sometimes challenging for conventional enterprises to emulate. Digital platforms consistently gather huge quantities of data on user behavior, preferences, and market trends (Nuccio & Guerzoni, 2018). The utilization of real-time data empowers corporations to promptly make well-informed selections and swiftly respond to dynamic developments.

Environment perspective

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The phenomenon of over-consumption and the prevalence of a throwaway culture have been identified as significant contributors to major environmental issues, including resource depletion and trash generation. the solution to mitigate the overutilization of resources and excessive waste is the implementation of a sharing economy, wherein the emphasis is placed on reducing new acquisitions and fostering the reuse of things. the sharing economy model under consideration is predicated on the collective utilization of certain commodities as a means to mitigate wastage. This is achieved by practices such as bartering, swapping, giving, renting, trading, lending, and borrowing various items that are either underutilized or deemed undesirable by certain groups of persons (Botsman & Rogers, 2010). The sharing economy facilitates the enhanced use of underutilized assets. The availability of short-term rental options at a reduced cost compared to ownership enables individuals to access assets and services that were previously inaccessible to them.

Issues of Sharing Economy 

Individual perspective

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Flexibility is widely seen as a primary benefit of gig labor. Employees frequently have the ability to exercise discretion in determining their preferred timing, location, and duration of labor. Nevertheless, the trade-off for such adaptability sometimes entails a compromise in terms of steadfastness. Healthcare coverage is included in the work perks of several nations. Gig workers, who are predominantly categorized as independent contractors, generally do not receive health insurance from the platforms they are affiliated with, exposing them to possible risks (Mironova et al., 2022). Moreover, the categorization of employees is a fundamental concern within the gig economy. Numerous platforms categorize workers as “independent contractors” as opposed to “employees.” This categorization implies that businesses are exempt from labor regulations that prescribe the minimum wage, overtime compensation, and other safeguards for workers (Ran & Zhao, 2023).

Industry perspective 

The sharing economy disrupted traditional business. The sharing economy leverages the potential of underutilized assets. Nowadays, both unoccupied rooms within a person’s residence and unused vehicles have the potential to create revenue. Traditional firms, characterized by their tangible assets and operational expenses, frequently have challenges in matching the resource efficiency exhibited by this level of performance. Digital platforms that facilitate the sharing economy exhibit reduced operational expenses in comparison to conventional corporate structures. There is no requirement for them to allocate resources towards tangible assets, sustain extensive inventory, or manage expansive physical infrastructures. Sharing economy platforms have the ability to rapidly adjust their scale in response to demand fluctuations, all while minimizing the need for substantial capital investment. The capacity to adapt enables these entities to promptly address shifts in the market, which poses a problem for conventional company structures that are less flexible which also is one of the most significant reasons why the sharing economy disruption the traditional economy.

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One of the primary concerns associated with Airbnb is its impact on local rent prices, rendering housing expensive for those residing and employed within the area. In 2018, there was a significant surge in tourist rentals on the Spanish island of Palma de Mallorca, resulting in a notable 50 percent increase in demand. Consequently, this heightened demand had a direct impact on the local residential rental market, causing a subsequent rise of 40 percent in rental prices. The aforementioned circumstance resulted in a lack of affordability in housing for a majority of the indigenous population (Alyse, 2023). In the year 2019, a collective of ten European cities collaborated to compose a joint correspondence addressed to the European Commission, wherein they elucidated the deficiencies inherent in platforms such as Airbnb. The rapid expansion of the short-term rental platform Airbnb has had a detrimental impact on the local rental market, prompting calls for the commission to address this matter in their upcoming agenda (Alyse, 2023).

Government perspective

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Numerous sharing economy platforms have encountered challenges in complying with regulatory frameworks. Occasionally, these entities engage in activities that reside within ambiguous legal boundaries, resulting in clashes with established regulatory frameworks designed for conventional enterprises. In 2016, Barcelona imposed a punishment of 600,000 euros on Airbnb due to its non-compliance with municipal regulations, including its persistent promotion of unauthorized accommodations. In 2015, a significant proportion of the houses offered on Airbnb, namely 44%, were found to be consistently and continuously accessible for rental in Paris. considering the existing regulations in place in France’s capital, which strictly limit the availability of vacation rentals to a maximum of 120 days per year (Alyse, 2023).

Critical thinking

The sharing economy, facilitated by the advancements of the digital era known as WEB2.0, has brought about both revitalization and disruption within the conventional economic framework. The advantages of this approach are apparent in terms of environmental benefits, optimal resource utilization, and enhanced market competition. Nevertheless, this emerging economic model also poses a distinct set of obstacles. The possible drawbacks of gig employment for individuals include the inherent volatility and absence of benefits which might counterbalance the advantages of having flexible work hours. Traditional industries often bear the impact of swift disruption, which can occasionally result in adverse outcomes for local communities, as seen by the housing market’s response to platforms such as Airbnb.

As the sharing economy undergoes further development, it becomes increasingly important to acknowledge its advantages while also tackling its drawbacks. The establishment of effective collaboration among many stakeholders, such as platforms, employees, traditional firms, consumers, and regulators, is crucial for facilitating the balance of the sharing economy with conventional economic systems, therefore maximizing its potential advantages.

This work is licensed under a Creative Commons Attribution 4.0 International License.


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