Quality Differentiation and Matching Efficiency in Peer-to-Peer Markets: Evidence from Airbnb Plus
Posted: 23 Dec 2020 Last revised: 2 Jan 2021
Date Written: October 6, 2020
Matching efficiency makes or breaks peer-to-peer (P2P) platforms’ business model. As the grassroots nature of these markets involves a shift toward elite offerings, will differentiating suppliers by quality increase matching efficiency? Should P2P platforms differentiate suppliers without marginalizing some? We seek answers by leveraging an empirical opportunity on Airbnb, which differentiates listings meeting high-quality criteria from regular ones through its Plus program in several U.S. cities. Our findings are threefold. First, we find a sizable increase ranging from 15.5% to 18.7% in market-level matching efficiency after the program. Second, the rise in matching efficiency is attributed to reduced search frictions, especially in markets with higher levels of discovery and evaluation costs. Third and intriguingly, the increase in the market-level matching efficiency is primarily driven by regular listings rather than high-quality ones. Our findings are robust across multiple checks and offer important insights for platform design and supplier management in P2P matching.
Keywords: Matching efficiency, quality differentiation, search frictions, peer-to-peer markets, quasi-experiment, difference-in-differences
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