Regulating sharing platforms in lateral exchange markets: The role of power and trust

This research aims to examine different types of sharing platforms based on risk perceptions of product/service providers and users, and to illustrate appropriate platform regulation preferences.

A survey was used (N=540) to collect data on platform participants’ risk perceptions and regulation preferences in the Chinese (N=263) and the US markets (N=277). Cluster analysis and multiple correspondence analysis were used to categorise platforms and match their regulation preferences with the risk characteristics.

The results show that i) four types of sharing platforms are categorised in terms of the risk perceived by the supply and demand side, and ii) four types of regulation preferences are clustered, drawing on the power and trust elements proposed from the slippery slope framework. Further, coercive power regulation is favoured by participants of platforms with high supply risk and low demand risk, legitimate power regulation is preferred by actors of platforms with low supply risk and high demand risk, reason-based trust regulation is preferred by actors of platforms with high supply and demand risk, and implicit trust regulation is favoured by participants of platforms with low supply and demand risk.

This paper develops an empirical typology of platforms based on risk perceptions of providers and users, and advances our understanding about lateral exchange markets from a consumer perspective.

This paper provides implications for platforms to regulate transactions through two mechanisms – the power of platforms and trust in platform participants.

Regulating by power ensures transaction security while regulating by trust enhances transaction efficiency, so it is important to configure the power and trust elements in platform regulation in an appropriate manner. This paper is one of the first attempts at addressing platform regulation and shows how consumers’ risk perception of platforms can lead to important implications for theory and practice in marketing and better regulation of platform transactions.