Collaborative Consumption

AAA

DEFINITION of 'Collaborative Consumption'

The shared use of a good or service by a group. Collaborative consumption differs from standard commercial consumption in that the cost of purchasing the good or service is not borne by one individual, but instead is divided across a larger group as the purchase price is recouped through renting or exchanging.

INVESTOPEDIA EXPLAINS 'Collaborative Consumption'

Collaborative consumption is, at heart, a form of sharing. Bartering and peer-to-peer renting, for example, have been used by societies for thousands of years and are a way to provide a group of individuals with an asset without requiring each to purchase it on his or her own.

Collaborative consumption is considered part of the sharing economy because it means that individuals are renting out their underused assets. It is most likely to be used when both the price of a particular asset, such as a car, is high and the asset is not utilized at all times. By renting out an asset when it is not being used, its owner is turning the asset into a sort of commodity and creating a scenario in which physical objects are treated as services.

Critics of collaborative consumption argue that the informal nature of such arrangements allows individuals to bypass local regulations that businesses offering similar services must follow. These businesses may have to pay licensing or other regulatory-related fees, thereby making their services more expensive than those provided by individuals who do not pay such fees.

RELATED TERMS
  1. Business Broker

    A professional who specializes in the purchase and sale of companies. ...
  2. Realtor Property Resource (RPR)

    A National Association of Realtors member benefit providing realtors ...
  3. Housing Choice Voucher Program

    The Housing Choice Voucher Program helps families with very low ...
  4. Sharing Economy

    An economic model in which individuals are able to borrow or ...
  5. Forbearance

    A temporary postponement of mortgage payments.
  6. Warranty of Title

    A guarantee by a seller to a buyer that the seller has the right ...
Related Articles
  1. Essential Tips For Buying A HUD Home
    Investing Basics

    Essential Tips For Buying A HUD Home

  2. Make Money Fast From The New 'Sharing ...
    Personal Finance

    Make Money Fast From The New 'Sharing ...

  3. Looking Out For Your Finances As A Renter
    Home & Auto

    Looking Out For Your Finances As A Renter

  4. Understanding The National Association ...
    Entrepreneurship

    Understanding The National Association ...

comments powered by Disqus
Hot Definitions
  1. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  2. Odious Debt

    Money borrowed by one country from another country and then misappropriated by national rulers. A nation's debt becomes odious ...
  3. Takeover

    A corporate action where an acquiring company makes a bid for an acquiree. If the target company is publicly traded, the ...
  4. Harvest Strategy

    A strategy in which investment in a particular line of business is reduced or eliminated because the revenue brought in by ...
  5. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  6. Pareto Principle

    A principle, named after economist Vilfredo Pareto, that specifies an unequal relationship between inputs and outputs. The ...
Trading Center