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

Management Science, forthcoming

81 Pages Posted: 18 Sep 2019 Last revised: 1 Aug 2022

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: July 2022

Abstract

We study professional players and their roles in peer-to-peer (P2P) markets. Most notably, P2P home-sharing platforms (e.g., Airbnb) consist of both professional hosts and nonprofessional individual hosts. What are the roles of the professionals? Should home-sharing platforms regulate their participation? Professional hosts may primarily offer properties that nonprofessional hosts would not supply and attract more guests—the differentiation effect. Or they may mostly supply similar properties and compete with the nonprofessionals—the competition effect. Using a unique dataset of Airbnb listings, we first find that professional hosts’ properties are more expensive and have superior characteristics than nonprofessionals’. Second, we capitalize on a quasi-experiment in which Airbnb capped the number of properties a host can manage in several cities in the United States to determine the roles of professional hosts. With different predictions (about the policy impacts) under the differentiation versus competition effects, we find evidence suggesting the dominance of the latter. In particular, the policy increased the supply from nonprofessional hosts, and the price level of nonprofessional properties as a group went up after the policy. However, our findings of heterogeneity in policy impacts suggest that the dominance of competition is less prominent in certain markets. Lastly, we find that the platform was not worse off in attracting reservations or securing revenue after the policy. Our findings contribute to both theory and practice as they reveal the roles of professional players and how P2P platforms can manage their participation.

Keywords: Peer-to-peer markets, Professional players, Competition, Differentiation, Platform economics, Airbnb

Suggested Citation

Chen, Wei and Wei, Zaiyan and Xie, Karen, Regulating Professional Players in Peer-to-Peer Markets: Evidence from Airbnb (July 2022). Management Science, forthcoming, Available at SSRN: https://ssrn.com/abstract=3450793 or http://dx.doi.org/10.2139/ssrn.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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