Platform as a Rule Maker: Evidence from Airbnb’s Cancellation Policies

Platform as a Rule Maker: Evidence from Airbnb’s Cancellation Policies

• Professor of Economics Liad Wagman
• Jian Jia (Stuart Ph.D. Management Science ’20), Economist, Amazon

Abstract:

Digital platforms are match-making intermediaries and establish internal rules that govern all users in their ecosystems. To better understand the governing role of platforms, we study two Airbnb pro-guest rules that pertain to guest and host cancellations, using data on Airbnb and VRBO listings in 10 United States cities. We demonstrate that such pro-guest rules can drive demand and supply to and from the platform as a function of the local platform competition between Airbnb and VRBO. Our results suggest that platform competition sometimes dampens a platform-wide, pro-guest rule and sometimes reinforces it, often with heterogeneous effects on different hosts. This implies that platform competition does not necessarily mitigate a platform’s incentive to treat the two sides asymmetrically, and any public policy in platform competition must consider its implication on all sides.

All Illinois Tech faculty, students, and staff are invited to attend.

The Friday Research Presentations series showcases ongoing academic research projects conducted by Stuart School of Business faculty and students and guest presentations by Illinois Tech colleagues, business professionals, and faculty from other leading business schools.