The economics of capacity-sharing platform openness: Competition and cooperation among asymmetric firms

The rise of B2B sharing platforms in the upstream market allows large firms with sizable loyal consumer bases and sufficient capacity to launch their own capacity-sharing platforms, which they can open to competitors, particularly small firms, to leverage the benefits of the sharing economy. This paper examines large firms' platform openness strategies and small firms' capacity-sharing decisions in a competitive environment. It shows that a large firm's decision to open its platform can either intensify or mitigate market competition, depending on the small firm's choice of capacity-sharing partner. When the small firm acquires capacity from its competitor, market competition is alleviated; however, when a low external transfer price drives it to source from external suppliers, market competition intensifies. Anticipating this, the large firm may refrain from opening the platform to preserve its pricing advantage, leading to a prisoner's dilemma. This dilemma is particularly pronounced when the two firms have similar loyal consumer bases but significantly different capacities. When the external transfer price is endogenized, the supplier needs to compensate the large firm via a service fee. The large firm could strategically subsidize the small firm to promote platform participation. When the large firm faces capacity constraints, unilateral or bilateral sharing becomes the most effective way to mitigate competition.