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

Abstract

We study professional players and their roles in peer-to-peer (P2P) markets. Most notably, P2P home-sharing platforms used to predominantly consist of nonprofessional individuals but have witnessed a rapid influx of professional hosts recently. What are the roles of professional hosts? Should home-sharing platforms regulate their participation? Professional hosts may primarily offer properties that nonprofessional hosts would not supply and help attract more guests (the market expansion effect). Conversely, they may mostly supply similar properties and compete with nonprofessional hosts (the competition effect). Using a unique dataset of Airbnb listings, we first find that professional hosts’ properties are more expensive and superior to nonprofessional hosts’ properties. Second, to examine the roles of professional hosts, we capitalize on a quasi-experiment that Airbnb capped the number of properties a host can manage in several U.S. cities. With different predictions about the policy impacts under the dominance of the market expansion effect versus the competition effect, we find evidence consistent with the latter. Specifically, the policy increased the supply from nonprofessional hosts, which overcompensated the restricted supply from professional hosts and boosted the total supply. The policy effects on various price levels and other market outcomes lend further support to the dominance of the competition effect. However, our findings of heterogeneous policy impacts suggest that the competition effect is not the whole picture. Lastly, the platform was not worse off in attracting reservations or securing revenue by rolling out the policy. Our study provides timely implications for managing professional players in peer-to-peer markets.

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