Peer-to-Peer Trading Platform: Implications for Production, Consumption, and Social Welfare in the Prosumer Economy

Jingxuan Geng, Saif Benjaafar

The rapid adoption of distributed renewable energy and manufacturing technologies has given rise to the concept of prosumers—individuals who are simultaneously consumers and producers. For instance, households with rooftop solar panels generate electricity for self-consumption but often produce surpluses that cannot be stored efficiently. Similarly, owners of 3D printers primarily use them for personal needs yet can also provide printing services to others when their machines are idle. Peer-to-peer (P2P) platforms, such as the Brooklyn Microgrid for energy trading, facilitate the exchange of these surplus resources by allowing prosumers to sell excess output or purchase additional capacity when needed.

While such platforms help alleviate inefficiencies by matching surplus with demand, they also raise significant operational and policy challenges. On the operational side, platform designers must determine pricing mechanisms that balance supply and demand while maintaining incentives for participation on both sides. From a broader perspective, policymakers are concerned with how these platforms shape prosumer behavior, including consumption patterns, capacity installation decisions, and overall welfare outcomes.

Our study, entitled “Peer-to-Peer Trading Platform: Implications for Production, Consumption, and Social Welfare in the Prosumer Economy”, builds a unified analytical framework that connects individual prosumer decisions with platform-level pricing strategies and welfare outcomes. Specifically, we ask three key questions: (1) What is the optimal price that maximizes the platform’s profit? (2) How does this price compare with the welfare-maximizing benchmark? (3) How do P2P platforms alter prosumers’ consumption, installed capacity, and surplus compared to a baseline without such platforms, and how do these effects differ under profit-maximizing versus welfare-maximizing regimes?

By addressing these questions, our research highlights the tension between private platform objectives and socially desirable outcomes. Preliminary results suggest that profit-maximizing pricing may lead to underutilization of installed capacity relative to the welfare benchmark, but can nevertheless increase overall surplus by enabling flexible resource reallocation among prosumers. In doing so, this work contributes to the growing literature on platform economics and sustainable operations by providing actionable insights for both platform designers and policymakers tasked with regulating decentralized markets.