Understanding the Sharing Economy: Case Study of Uber

Understanding the Sharing Economy: Case Study of Uber
Uber is a ride hailing computer application that connects those offering taxi services to those
who demand taxt services. Uber, is a part of what Is known as a sharing economy, an economy
that tis this based on connecting those who are in need of products and services to those who are
demand a product. A sharing economy cannot be defined since it encompasses a whole spectrum
of activities. (Rinne, 2017) .
In the past, the transaction costs of connecting the supply and demand side were prohibitive.
(Furchtgott-Roth, 2016) For example, a boutique would require an investment in real estate to
showcase products by designers to consumers. However, due to the advent of easy access to
internet, the need for a retail space is foregone. The cost of downloading an app, offering
services on an app is negligible in most cases. Applications such as Uber have simply connected
more buyers and sellers in a virtual world that is not limited by space constraints or geographical
constraints. As a result the cost per capita has decreased. Owing to the lack of prohibitive factors
such as geography, high transaction costs, lack of information, buyers have access to more
sellers and sellers have access to more buyers. Thus, a sharing economy helps build an economy
that is closer to the perfect competition and helps more efficient allocation of resources. (Oxera
Consulting LLP, 2015)
From a macro-economic perspective, access to a sharing economy instead of having to secure
outright ownership of any good or service would reduce the need for capital goods and “hastens
the amortization of the ownership costs of those still sold”. (Anonymous, 2017) This implies that
the pay off of the capital goods is simply better in a sharing economy.
A sharing economy may also, be important from the point of view of sustainable development.
The total number of resources required would be lower, if goods are shared. For example, Uber
reduces the need to own a car. (Press Trust of India, 2015) Hence, once car is shared by several
users instead of being used privately by a family of two. The resources required to build up cars
could be used to produce other goods and services. If the natural resources available to humans
are limited, then the increased efficiency will simply allow for more goods and services to be
produced and consumed at lower costs.