Exploring the Role of Trust Indicators in the P2P Economy: Analysis and Simulations of an Airbnb Market

Abstract

We propose a structural econometric model in which listings in an Airbnb market differ not only in their attributes, but also in their seller’s characteristics as trust indicators. Applying the model to Stockholm’s Airbnb market reveals that hosts’ attributes significantly affect market performance. Simulations of market scenarios show that the very high review scores and the Superhost certification help Airbnb compete with hotels and increase its market welfare. We also show that the “Airbnb plus” luxury program, which makes the apartments a closer substitute for hotels, leads to an increase in Airbnb’s market welfare. Our analysis provides a framework for understanding the full impact of the different attributes of the products, their providers and their management in the sharing-economy accommodation market.

Keywords: Airbnb; trust; structural econometric model; differentiated goods market

JEL Classification: D22, L11