You Get What You Give: Theory and Evidence of Reciprocity in the Sharing Economy

44 Pages Posted: 17 Jul 2018

See all articles by Davide Proserpio

Davide Proserpio

Marshall School of Business, University of Southern California

Wendy Xu

Boston University

Georgios Zervas

Questrom School of Business, Boston University

Date Written: June 27, 2018

Abstract

We develop an analytical framework of peer interaction in the sharing economy that incorporates reciprocity, the tendency to increase (decrease) effort in response to others’ increased (decreased) effort. In our model, buyers (sellers) can induce sellers (buyers) to exert more effort by behaving well themselves. We demonstrate that this joint increased effort can improve the utility of both parties and influence the market equilibrium. We also show that bilateral reputation systems, which allow both buyers and sellers to review each other, are more responsive to reciprocity than unilateral reputation systems. By rewarding reciprocal behavior, bilateral reputation systems generate trust among strangers and informally regulate their behavior. We test the predictions of our model using data from Airbnb, a popular peer-to-peer accommodation platform. We show that Airbnb hosts that are more reciprocal receive higher ratings, and that higher rated hosts can increase their prices. Therefore, reciprocity affects equilibrium prices on Airbnb through its impact on ratings, as predicted by our analytical framework.

Keywords: Airbnb, Sharing Economy, Reputation, Online Reviews, Reciprocity

Suggested Citation

Proserpio, Davide and Xu, Wendy and Zervas, Georgios, You Get What You Give: Theory and Evidence of Reciprocity in the Sharing Economy (June 27, 2018). Available at SSRN: https://ssrn.com/abstract=3203144 or http://dx.doi.org/10.2139/ssrn.3203144

Davide Proserpio (Contact Author)

Marshall School of Business, University of Southern California ( email )

701 Exposition Blvd
Los Angeles, CA Los Angeles 90089
United States

HOME PAGE: http://faculty.marshall.usc.edu/Davide-Proserpio/

Wendy Xu

Boston University ( email )

595 Commonwealth Avenue
Boston, MA 02215
United States

Georgios Zervas

Questrom School of Business, Boston University ( email )

United States

HOME PAGE: http://people.bu.edu/zg

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