Quality Differentiation and Matching Performance in Peer-to-peer Markets: Evidence from Airbnb Plus
Posted: 23 Dec 2020 Last revised: 6 Jun 2022
Date Written: June 2, 2022
Matching makes or breaks peer-to-peer (P2P) markets. As P2P markets shift from their grassroots nature toward elite offerings, will differentiating suppliers by quality increase matching performance? Can P2P markets differentiate certain suppliers without marginalizing others? We seek answers to these questions by leveraging an empirical opportunity on Airbnb, which differentiates listings meeting high-quality standards from others through its Plus program in several U.S. cities. Our findings are threefold. First, we find a sizable increase in market-level matching performance after the program launch, ranging from 15.8% to 16.2% (measured by the number of booked nights). Second, the rise in matching performance is attributed to reduced search frictions evident in markets with high discovery costs and evaluation costs. Third, the Plus program benefits all listing tiers in terms of both bookings and price, including Plus listings, close-to-Plus listings, and regular listings, yielding the most benefit to the Plus listings and close-to-Plus listings. Regular listings see a smaller increase in price, but they also receive increased bookings due to their enhanced competitive pricing. Our findings hold across multiple robustness checks and offer important insights for platform design and supply management in P2P platforms.
Keywords: Matching performance, quality differentiation, search frictions, peer-to-peer markets, quasi-experiment, difference-in-differences
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