Pricing in C2C Sharing Platforms

Sharing platforms such as zilok.com enable sharing of durable goods among consumers, and seek to maximize profits by charging transaction-based platform fees. We develop a model in which consumers who have heterogeneous needs concerning the use of a durable good decide whether to purchase and share (i.e., be a lender) or borrow (i.e., be a borrower), and a monopoly sharing platform determines the platform fees. We find, first, that consumers with greater need to use a durable good purchase and share, and that consumers with lesser need borrow. Second, sharing platforms maximize profits only if the supply of a durable good matches demand—that is, the market must clear in order for platform fees to be profit maximizing. Third, the market-clearing condition requires lender and borrower fees are classic strategic complements. Fourth, to maintain the market-clearing condition, sharing platforms have to increase their lender fee or decrease their borrower fee in response to increases in the sharing price, increases in usage capacity, and decreases in the purchase price of a durable good, and vice versa. These findings indicate that commonly applied one-sided pricing models in sharing platforms can be improved

Decision Support for IT Investment Projects - A Real Option Analysis Approach Based on Relaxed Assumptions

Managerial flexibilities have to be taken into account in ex-ante decision-making on IT investment projects (ITIPs). In many papers of the IS literature, standard financial option pricing models are used to value such managerial flexibilities. Based on a review of the related literature, the paper critically discusses the assumptions of the most frequently used financial option pricing model, namely the Black–Scholes model, arguing for relaxed assumptions that better represent the characteristics of ITIPs. The authors find that existing real option analysis approaches featured in the IS, Finance, and Economics literature are unable to consider more than two of our relaxed assumptions. Consequently, they present their own approach in form of a simulation model for the valuation of real options in ITIPs which offers a better representation of the characteristics of ITIPs by taking the discounted cash-flows and the runtime to be uncertain as well as the market to be incomplete. Based on these modifications of the Black–Scholes model’s assumptions, it is found that the resulting option value contains idiosyncratic risk that has to be taken into account in ITIP decision making. For the realistic case of risk averse decision makers, the consideration of idiosyncratic risk usually leads to a lower risk-adjusted option value, compared to one calculated by means of the Black–Scholes model. This confirms the perception of managers who feel that financial option pricing models frequently overvalue ITIPs and hence may induce flawed investment decisions