Public Values, Private Regulators: Between Regulation and Reputation in the Sharing Economy

Abstract

In traditional sectors, the intervention of private parties in the regulatory system tends to be justified by their enhanced expertise, government cuts or efficiency gains. In the sharing economy (e.g., home-sharing services offered by Airbnb), quality control and regulatory tasks (e.g., inspections) are to, a great extent, informally delegated to online platforms and peer-to-peer communities that rate and review performance. These communities consist of users that do not have more than their personal experience and the guidance of online platforms to underpin their assessments. Existing literature has criticized extensively the reliability of these online reputational mechanisms but it has overlooked other far-reaching effects of outsourcing regulatory tasks to private parties. This article offers a more complete analysis of the regulatory value of online reputation. I argue that reputational mechanisms have the potential of creating democratic spaces where users can provide unique, regular and first-hand insights that would otherwise be disregarded in a traditional regulatory system. Nevertheless, in their current form, these mechanisms still offer inadequate protection to the public values that typically underlie the regulation of certain services. This article explains this problem by comparing the protection of public values in the sharing economy to that of traditional regulated sectors.

This article contributes to the literature by reflecting on whether the sharing economy is inviting us to rethink the broader involvement of citizens in the protection of public values and the challenges thereof. This article suggests a framework for the improvement of online reputational mechanisms and a better dialogue between traditional regulation and online reputation.

Keywords: online reputation; public interest; regulation; sharing economy; online platforms; discrimination; peer-to-peer economy; professions; automation

JEL Classification: K20, K23