Collaborative Consumption

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.



comments powered by Disqus
Hot Definitions
  1. Maintenance Margin

    The minimum amount of equity that must be maintained in a margin account. In the context of the NYSE and FINRA, after an investor has bought securities on margin, the minimum required level of margin is 25% of the total market value of the securities in the margin account.
  2. Leased Bank Guarantee

    A bank guarantee that is leased to a third party for a specific fee. The issuing bank will conduct due diligence on the creditworthiness of the customer looking to secure a bank guarantee, then lease a guarantee to that customer for a set amount of money and over a set period of time, typically less than two years.
  3. Degree Of Financial Leverage - DFL

    A ratio that measures the sensitivity of a company’s earnings per share (EPS) to fluctuations in its operating income, as a result of changes in its capital structure. Degree of Financial Leverage (DFL) measures the percentage change in EPS for a unit change in earnings before interest and taxes (EBIT).
  4. Jeff Bezos

    Self-made billionaire Jeff Bezos is famous for founding online retail giant Amazon.com.
  5. Re-fracking

    Re-fracking is the practice of returning to older wells that had been fracked in the recent past to capitalize on newer, more effective extraction technology. Re-fracking can be effective on especially tight oil deposits – where the shale products low yields – to extend their productivity.
  6. TIMP (acronym)

    'TIMP' is an acronym that stands for 'Turkey, Indonesia, Mexico and Philippines.' Similar to BRIC (Brazil, Russia, India and China), the acronym was coined by and investor/economist to group fast-growing emerging market economies in similar states of economic development.
Trading Center