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

Posted: 18 Sep 2019

See all articles by Wei Chen

Wei Chen

University of Arizona - Eller College of Management

Zaiyan Wei

Purdue University - Krannert School of Management

Karen Xie

University of Denver, Daniels College of Business

Date Written: September 2019

Abstract

In the early years, service providers on peer-to-peer (P2P) platforms (Airbnb, Uber, Lending Club, etc.) were individuals possessing limited resources. But this picture has changed drastically, with a new class of professional players rising to eradicate the peer-to-peer nature. For example, property managers or individuals who operate multiple properties account for fairly large market shares on Airbnb. The very institutions that the P2P platforms aimed to disrupt seem now their dominating figures. What are the impacts of professional players in a P2P market? Should P2P platforms regulate the participation of professional players? We seek answers to these questions by utilizing a quasi-experimental opportunity when Airbnb announced a policy that caps the participation of professional hosts in several major U.S. cities. We collected data on Airbnb and deployed a plethora of estimations involving matching-adjusted difference-in-differences and synthetic controls using this policy shock to identify the impact of professional hosts. Our findings suggest that the policy led to an increase in Airbnb supply — primarily driven by fewer exits of small unprofessional players — and, consequently, a drop in the market-level price due to the change in market composition. The drop of price, unexpectedly, was followed by a drop in the transaction volume on Airbnb. This is because, by precluding professional players from the planform, Airbnb lost “high-end” consumers (who prefer professional services) to the extent that the lost dominated the expansion of the “low-end” segment (filled with homogenous unprofessional hosts). We find the policy impact is especially salient in markets with a high level of Airbnb penetration and maturity. This research makes the first attempt to reason how the rise of professional players challenges the nature of the P2P economy. The findings have important welfare implications and provide timely and managerially relevant recommendations on supplier management that is centric to any P2P platforms.

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

Suggested Citation

Chen, Wei and Wei, Zaiyan and Xie, Karen, Regulating Professional Players in Peer-to-Peer Markets: Evidence from Airbnb (September 2019). Available at SSRN: https://ssrn.com/abstract=3450793

Wei Chen

University of Arizona - Eller College of Management ( email )

McClelland Hall
P.O. Box 210108
Tucson, AZ 85721-0108
United States

Zaiyan Wei (Contact Author)

Purdue University - Krannert School of Management ( email )

100 Grant St
West Lafayette, IN 47907-2076
United States
(765) 494-5958 (Phone)

Karen Xie

University of Denver, Daniels College of Business ( email )

2101 S. University Blvd.
Denver, CO 80208
United States

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