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Discrimination with Incomplete Information in the Sharing Economy: Evidence from Field Experiments on Airbnb

35 Pages Posted: 9 Jan 2017 Last revised: 27 Oct 2017

Ruomeng Cui

Goizueta Business School, Emory University

Jun Li

University of Michigan, Stephen M. Ross School of Business

Dennis J. Zhang

Washington University in St. Louis - John M. Olin Business School

Date Written: December 8, 2016

Abstract

Recent research has found widespread discrimination by hosts against guests of certain races in online marketplaces. In this paper, we explore ways to reduce such discrimination using online reputation systems. We conduct three randomized field experiments among 1,508 hosts on Airbnb by creating fictitious guest accounts and sending accommodation requests to them. We find that requests from guests with African American-sounding names are 19.2 percentage points less likely to be accepted than those with White-sounding names. However, a review posted on a guest's page significantly reduces discrimination: when guest accounts receive a positive or non-positive review, the acceptance rates of guest accounts with White-sounding and African American-sounding names are statistically indistinguishable. We further show that the self-claimed information that signals guest's tidiness and friendliness cannot reduce discrimination, indicating the importance of incentivising peer-generated reviews. Our finding is consistent with statistical discrimination: when lacking relevant information, hosts infer the quality of a guest by using their prior beliefs which are based on the average quality of each racial group; when more information is provided, hosts give less weight on guests' race when assessing their quality, and statistical discrimination is reduced. Our results offer direct and clear guidance for sharing-economy platforms to reduce discrimination.

Keywords: Discrimination, Field Experiment, Information Sharing, Service Operations, Sharing Economy

Suggested Citation

Cui, Ruomeng and Li, Jun and Zhang, Dennis J., Discrimination with Incomplete Information in the Sharing Economy: Evidence from Field Experiments on Airbnb (December 8, 2016). Available at SSRN: https://ssrn.com/abstract=2882982

Ruomeng Cui

Goizueta Business School, Emory University ( email )

1300 Clifton Road
Atlanta, GA 30322
United States

HOME PAGE: http://www.ruomengcui.com

Jun Li

University of Michigan, Stephen M. Ross School of Business ( email )

701 Tappan Street
Ann Arbor, MI MI 48109
United States

Dennis Zhang (Contact Author)

Washington University in St. Louis - John M. Olin Business School ( email )

One Brookings Drive
Campus Box 1133
St. Louis, MO 63130-4899
United States

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