Cancellation Policy as a Signal of Trust and Quality in the Sharing Economy: The Case of Airbnb

52 Pages Posted: 21 Dec 2018

See all articles by Lior Zalmanson

Lior Zalmanson

University of Haifa

Davide Proserpio

Marshall School of Business, University of Southern California

Irit Nitzan

Tel Aviv University - Coller School of Management

Date Written: November 28, 2018

Abstract

We study the effect of cancellation policy settings on listing demand in the context of Airbnb, a popular home-sharing platform. We employ a difference in differences strategy to show that, contrary to previous findings in the traditional accommodation industry, listings with a strict cancellation policy have, on average, four percentage points higher demand than listings with a more lenient policy. We complement these findings with a survey of real Airbnb users aimed at understanding the mechanisms behind our results. We find that Airbnb guests perceive listings with a strict cancellation policy to be of higher quality and their host to be more trustworthy. These results suggest that the cancellation policy of a listing can act as a signal of quality and, in turn, can increase the listing demand. Overall, our findings suggest that sharing economy platforms like Airbnb do not only offer a new business model and value proposition, but they also have the potential to affect consumer behavior and their decision-making process in ways that are different from more traditional settings.

Keywords: Airbnb, Sharing Economy, Peer-to-Peer Markets, Trust, Reputation

Suggested Citation

Zalmanson, Lior and Proserpio, Davide and Nitzan, Irit, Cancellation Policy as a Signal of Trust and Quality in the Sharing Economy: The Case of Airbnb (November 28, 2018). Available at SSRN: https://ssrn.com/abstract=3292336 or http://dx.doi.org/10.2139/ssrn.3292336

Lior Zalmanson

University of Haifa ( email )

Mount Carmel
Haifa, 31905
Israel

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/

Irit Nitzan

Tel Aviv University - Coller School of Management ( email )

Tel Aviv
Israel

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