Regulating Professional Players in Peer-to-Peer Markets: Evidence from Airbnb

Abstract

We study professional players and their impacts in peer-to-peer (P2P) markets. P2P markets predominantly consisted of individual, nonprofessional agents but have recently witnessed a rapid influx of corporate suppliers and other professional agents who capitalize on these platforms. What is the role of professional players in a P2P market? Should platforms regulate professional players? We seek answers to these questions by leveraging a quasi-experimental opportunity on Airbnb that implemented a restriction on the number of properties a host can manage in several U.S. cities. Our empirical findings are mainly threefold. First, we find that the properties of professional hosts, who were subject to the policy restriction, were of higher quality and more expensive than those of their nonprofessional counterparts and, likely because of that, secured higher revenue. Second, by restricting the participation of professional hosts, the policy, surprisingly, increased the total supply on the platform. In addition, although we find that the policy decreased property booking prices, the total reservations at the market level were not significantly affected. Further evidence indicates that these policy effects can be attributed to the change in the composition of hosts after the policy (i.e., more nonprofessional hosts stayed in the market), which cannibalizes the demand of customers who prefer professional services. Lastly, we find the policy reduced platform revenue. Our findings provide timely implications for platform governance, vertical differentiation, and supplier management in P2P markets.

Keywords: Professional players, Peer-to-peer markets, Market structure, Platform economics, Airbnb