Monday, July 7, 2014

The Sharing Economy

I've been getting quite a few flames from folks, for varioius provocations, mostly deserved.

Much of it from the podcast at EconTalk, on "the sharing economy."

One reader asked whether there was anything that was profitable that I would still say should perhaps be regulated.  Of course, one answer is pollution:  a business that took toxic waste, charged some amount to dispose of it, and dumped the stuff in the river, untreated...that would be bad.  You can say it's because property rights to the river are not well-specified, and okay, that's right.  But the point is that the "profits" are just rents, collected because the person is unscrupulous and charges less than rivals who treat the waste and make it safe before putting it back in the environment.

Here, though, is a stumper.  And I want to ask the EE crowd:  Is this a legit business?  Book up all the reservations at restaurants, and then (re)sell them?  (They say "one table per restaurant," but c'mon...) Like ParkingMonkey App, but for restaurant seats?

I think it's a bad idea.  I'm not sure exactly why.  Can you help?  Or am I wrong, and this is fine.  I don't mean "legal," alone.  I mean, is this morally acceptable?  Is it efficiency enhancing?



  2. There are lots of reasons why it's bad. Here are a couple.

    One is that it's a racket. It creates a situation where the guy can expand the size of his market by exacerbating the problem (e.g., making many fake reservations thus filling up the queue with customers who mysteriously evaporate but not before the agendas of restaurants are "full").

    Another there are many problems that accumulate if similar services pop up. OK, maybe it's not a big deal if he's the only one doing it. What happens when 3 or 5 other copycats jump in and try to compete on his turf? Now there are fake reservations everywhere?

    He also claims that he cancels reservations 4 hours prior the appointed time. Is that enough time? Too little? Are we sure that he's following this rule? What about his hypothetical competitors?

    Restaurants can solve this problem (if it really rises to the level of "problem" rather than "annoyance") simply by asking for a deposit to be left by credit card with a reservation.

    There is, in my estimation, no problem here; patrons should just plan ahead!


Do you have suggestions on where we could find more examples of this phenomenon?