Collaborative Economy – Definition

Cite this article as:"Collaborative Economy – Definition," in The Business Professor, updated January 18, 2020, last accessed October 19, 2020,


Collaborative Economy Definition

A collaborative economy is a type of economy where consumers rely on one another for the satisfaction of their needs. This means consumers are able to get what they need from one another. In a collaborative economy, a consumer who is in need of a product or service approaches another consumer who has it and is ready to release it and they collaborate to meet each other’s needs.

Crucial to a collaborative economy are terms like ‚Äėsharing, trading, swapping, borrowing, and lending‚Äô of products between consumers. The sharing, swapping or renting is often done for a fee. A collaborative economy is otherwise known as a ‚Äúpeer-to-peer economy‚ÄĚ or a ‚Äúsharing economy.‚ÄĚ

A Little More on What is a Collaborative Economy

The presence of middlemen in a collaborative economy is essential, they facilitate the exchange, distribution or sharing of goods between consumers. A corporate firm, group or individuals can function as middlemen in the collaborative economy, they enhance the exchange of goods and services and facilitate reliance amongst consumers. Examples of companies that act as middlemen in a collaborative economy are; Craigslist, Uber, Esty, eBay, and many others.

A collaborative economy uses a decentralized network that allows consumers to get what they need from other consumers in the market place. The collaborative economy is also described as a model for the distribution of goods and services but it is quite different from other models.

Collaborative Economy Examples

In many countries, a collaborative economy exists, in this economy, consumers who are in need of specific services and goods can rely on other consumers to meet their needs. These two sets of market participants are liked by platforms and companies that function as middlemen. Goods and services are often distributed or shard in a collaborative economy in exchange for a fee. For instance, Uber is a cab industry that connects drivers who have cars to customers who are in need of affordable rides to different locations. The consumer taking the ride pays the driver a fee for their service and the middleman (channel) which is Uber also earns a commission for liking the consumers.

Collaborative Economy Challenges

Despite the numerous benefits of a collaborative economy, it has its challenges; the major ones are;

  • The activities in a collaborative economy pose a great threat to businesses that manufacture their goods and depend on consumers purchasing them, given that most consumers prefer sharing to buying.
  • This economy kills other businesses that exist outside of the economy.
  • A collaborative economy is highly unregulated and a lot of atrocities are likely to occur.

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