May 15, 2015

The Sharing Economy and Consumer Protection Regulation: The Case for Policy Change

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The rise of the sharing economy has changed how many Americans commute, shop, vacation, and borrow. It has also disrupted long-established industries, from taxis to hotels, and has confounded policymakers. In particular, regulators are trying to determine how to apply many of the traditional “consumer protection” regulations to these new and innovative firms. 

The key contribution of the sharing economy, however, is that it has overcome market imperfections without recourse to traditional forms of regulation. Continued application of these outmoded regulatory regimes is likely to harm consumers. We argue that the Internet, and the rapid growth of the sharing economy, alleviates the need for much of this top-down regulation, with these recent innovations likely doing a much better job of serving consumer needs.  

When market circumstances change dramatically — or when new technology or competition alleviates the need for regulation — then public policy should evolve and adapt to accommodate these realities. This paper concludes with some proposals for further research in this area, and a call for a more informed regulatory approach that accounts for the innovations of the sharing economy.

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