The Dynamics of Asset Sharing and Private Use

Abstract

The collaborative consumption of an asset, such as a car, an appliance, or a power tool, tends to degrade it faster than when it is kept for purely personal use. This paper examines the rational dynamic decision of when to share an asset and when to use it only privately. An optimal policy trades off additional degradation and resulting lifetime reduction against the additional revenue from sharing. Solving the underlying continuous-time optimal control problem, we characterize three possible regimes: personal consumption, full sharing, and partial sharing. Collaborative consumption may be optimal only at the beginning of the asset's lifetime; the optimal time to switch from sharing to pure private consumption is obtained in closed form.