Effects of the Sharing Economy on Sequential Innovation Products

Table 1

Notations and definitions used in the model.

t, n	Positive integer, t=1, 2, 3…, n=1, 2, 3….
i	Two usage periods, i=t (first period), t+1 (second period).
j	Products, j=n (Generation n product), n+1 (Generation n+1 product), s (sharing product).
q	Upgraded product’s quality.
c1	Upgraded product’s marginal cost.
p1	Upgraded product’s price.
	Product’s durability, φ∈(0,1).
c2	Old product’s marginal cost.
p2	Old product’s price.
	Renter’s acceptance of used products, β∈(0,1).
ps	Sharing product’s price.
m	Moral hazard cost.
	Sharing platform’s percentage fee, .
	Salvage value of product.
	Consumer’s valuation for quality, θ~U.
Ui,j	Consumer’s utility of choosing product j in period i.
di,j	Demand of product j in period i.
	Manufacturer’s total profit for two periods.
	Third-party platform’s profit.
	Owner’s earnings.
N	Equilibrium outcomes in the case of there being no sharing market, denoted as a superscript N.
S	Equilibrium outcomes in the case of sharing market with the platform pricing, denoted as a superscript S.
SO	Equilibrium outcomes in the case of sharing market with the owner pricing, denoted as a superscript SO.