Question

In this chapter, we have discussed how markets work. Recently some new markets have emerged that focus on sharing of durable goods among a wider circle of users. The rise of these sharing markets may well have an impact on the relationship between the economy and the environment.
What are the market niches these firms have found? How is Airbnb different from Hilton? How is Uber different from Hertz or Yellow Cab? Is this a matter mainly of a different type of supply or is the demand side affected as well?
Why now? Markets for personal transportation and temporary housing have been around for a long time. How can these new companies find profitable opportunities in markets that have existed for some time? Is it evidence that the markets are not competitive? Or have the new opportunities been created by some changes in market conditions?
Are these new sharing markets likely on balance to be good for or harmful to the environment? Why?

Answer 1

What are the market niches these firms have found?

Niche is created when product features are aimed at satisfaction of specific market needs, the price range, production quality and the demographics that it is intended to target. It is also a small market segment.

Example- Rentomojo in India offers consumer durables on rent.

These rental firms are aiming at young students, just joined employees which are unsure of job settlement and also those people who have jobs changing locations.

How is Airbnb different from Hilton? How is Uber different from Hertz or Yellow Cab? Is this a matter mainly of a different type of supply or is the demand side affected as well?

Airbnb is just a link between customer and service provider and does not own assets . Hilton is a range of hotels which has assets. Similarly Uber connects passengers and taxi drivers. Hertz has its own fleet of cars.

Why now?

Because of changing life styles. It is convenient to use things according to need rather than owning and investing huge money blocking capital. It is also a fact that consumer durables are difficult to transport and has a lot of cost.

Markets for personal transportation and temporary housing have been around for a long time. How can these new companies find profitable opportunities in markets that have existed for some time?

As explained above niche market has a lot of potential and people can use better quality of durables at lesser cost and hence fashion trends are also in their favour.

Is it evidence that the markets are not competitive?

Markets are non competitive as of now but are very easy to enter and hence competition is likely to go up.

Or have the new opportunities been created by some changes in market conditions?

New opportunities exist and we will see new firms entering in this businesses.

Are these new sharing markets likely on balance to be good for or harmful to the environment? Why?

This will be good for an environment as less amount of goods will be produced. However that demands on elatsicity of demand. It will certainly be a plus to reduce expenditures but people may spend this money on traveling and entertainment which may be derogatory on environment.