An Empirical Study of the Antecedents and Consequences of Automated Approval Delegation: Instant Booking on Airbnb

Abstract

A key transaction cost of online accommodation sharing is the need for manual screening by both hosts and guests. To improve market efficiency, Airbnb introduced an instant booking function that enables hosts to delegate the approval of reservations to the platform. Despite the convenience of instant booking, many hosts are hesitant to adopt it and continue to screen guests manually. Therefore, this study explores why and when Airbnb hosts delegate guest screening to the platform. Additionally, we examine the effects of instant booking adoption to understand the consequences of delegation. Using rich panel data from Airbnb, we draw on delegation theories to explore why and when hosts adopt instant booking. We further employ propensity score matching and difference-in-differences methods to examine the outcome of instant booking. Our findings indicate that hosts who have previously experienced high-quality guests are more likely to adopt instant booking. Furthermore, hosts with highly popular listings are less likely to adopt instant booking, especially those sharing their primary properties. The more popular the accommodation, the more hesitant hosts are to adopt instant booking. We also find that instant booking leads to more desirable guests and makes accommodations more popular. This study makes valuable contributions to the literature on accommodation-sharing operations management. These findings shed light on how operations managers of accommodation-sharing platforms can promote automated delegation. The results are also crucial to service providers interested in the benefits of platform delegations.

Keywords: accommodation sharing, instant book, delegation, guest quality, accommodation popularity

JEL Classification: M15,M31