Agent Behavior in the Sharing Economy: Evidence from Airbnb

One of the major differences between markets that follow a " sharing economy " paradigm and traditional two-sided markets is that, in the sharing economy, the supply side includes individual nonprofessional decision makers, in contrast to firms and professional agents. Using a data set of prices and availability of listings on Airbnb, we find that there exist substantial differences in the operational and financial performances between professional and nonprofessional hosts. In particular, properties managed by professional hosts earn 16.9% more in daily revenue, have 15.5% higher occupancy rates, and are 13.6% less likely to exit the market compared with properties owned by nonprofessional hosts, even after controlling for property and market characteristics. We demonstrate that these performance discrepancies between professionals and nonprofessionals can be partly explained by pricing inefficiencies. Specifically, we provide empirical evidence that nonprofessional hosts are less likely to offer different rates across stay dates based on the underlying demand, such as major holidays and conventions. We develop a parsimonious model to analyze the implications of having two such different host groups for a profit-maximizing platform operator and for a social planner. While a profit-maximizing platform operator should charge lower prices to nonprofessional hosts, a social planner would charge the same prices to professionals and nonprofessionals.