Earning More by Selling Less in the Sharing Economy: The Secret of Provider Experience

The sharing economy, enabled by digital platforms which connect providers and consumers for peer-to-peer exchanges, has experienced rapid growth in recent years. Although researchers have attempted to explore the societal or business impact of the sharing economy market, little is known about how individual providers operate their business. In this study, we are interested in the relationship between experience and sales performance of providers. Leveraging a rich and proprietary dataset from a large sharing economy platform which facilitates the exchanges of home-cooked meals in China, and employing multiple identification strategies and estimation methods, we find that a provider’s sales order first increases with her experience but then decreases instead. However, her sales revenue keeps increasing with experience. Our further investigation shows that this is because experienced providers are seeking higher order value via order selection, which allows them to earn more revenue by selling less. Lastly, we also find that an experienced provider will adopt strategies of improving product quality, offering more promotion, increasing product variety, and differentiating products from competitors. Through these strategies, a provider could attract more orders and then choose those with higher value. Our study serves as the first attempt to empirically understand providers’ market behavior in the sharing economy, and offers important practical implications.