The Sharing Economy

Back on Christmas Eve of 2013, Frédéric Mazzella had to travel back home with his sister. Many drivers would probably have been happy to share a seat in their own private cars for a fee with him. However, the cost of looking for them, negotiating the conditions (pick up time and place, fee to be paid, etc.), and checking whether the driver would be safe were too large to make such transaction possible. The transaction costs were actually higher than the benefit derived from sharing the ride. Thus, sharing drives was traditionally limited to relatives, friends, and work colleagues. Transaction costs were lower among closely related individuals, but the chances of finding a match were also very low.

BlaBlaCar, like all successful platforms, reduces the costs of sharing. Parties interested in sharing a ride identify themselves via the platform, identify the route to be driven, their location, the sharing conditions, etc. Platforms match drivers offering a specific ride with passengers interested in that specific ride. Algorithms automate the matching process13 at a low cost. Communication between drivers and passengers takes place though the app at no cost for the users. Online platforms reduce the cost of sharing to below the benefit derived from sharing

Mazzella was always interested in building trust among participants. Trust is particularly necessary in carpooling, as passengers must rely on the driving ability of an unknown person, and risks are high. Trust is facilitated by the new cultural values created by the social networks, as well as by specific instruments provided by the platform such as identification of the users and the provision of personal information about them. For instance, BlaBlaCar users must provide information about how chatty they are (their blabla level). Users rate themselves and provide evaluations, “likes,” etc. Artificial intelligence tools help to manage ratings by excluding fraudulent or non-relevant ratings, thus generating algorithmic network effects, even if less relevant than in other platforms.

BlaBlaCar has achieved a high level of trust among users. In a paper that Mazzella drafted with the sharing economy guru Arun Sundararajan,14 the results of a large survey among BlaBlaCar users confirmed that trust among the users of the platform was higher than trust in work colleagues and neighbors, and close to trust in relatives.15

BlaBlaCar is the leading example of the so-called “sharing economy” in the transportation industry. Sharing, defined as using an asset jointly, either at the same time or in turns, is as old as humanity. However, over the past decade, a new socio-economic model has emerged around the notion of sharing both assets and services. It is the “sharing economy,” also called “collaborative consumption.”16

From the perspective of supply, individuals are empowered by online platforms such as BlaBlaCar to provide transport services to other individuals, making use of their own idle resources, such as empty seats in their cars when making a trip. Non-professional drivers are in a position to compete with traditional transport companies such as railway and bus companies.

From the demand perspective, there is a general trend towards choosing access over ownership. Individual ownership of assets is replaced with the possibility to use assets without owning them. Savvy consumers are increasingly aware of the cost of owning assets in terms of maintenance, repairs, insurance, storage, etc., as well as of the externalities in the form of congestion, environmental damage, etc. The reduction in the rate of private vehicle ownership in the most developed societies is a good example, as is the even more significant trend among young people to either not obtain a driver’s license or to delay taking their license exam.17 At the same time, increasing economic hardship is generating a new demand for low-cost services. Good examples are air transportation and the proliferation of low-cost bus services. Carpooling is becoming a new transport mode in competition with other public transportation modes such as railways and buses.

 
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