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

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Listed:
  • Jian Jia
  • Ginger Zhe Jin
  • Liad Wagman

Abstract

Digital platforms are not only match-making intermediaries but also 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 US 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.

Suggested Citation

  • Jian Jia & Ginger Zhe Jin & Liad Wagman, 2021. "Platform as a Rule-Maker: Evidence from Airbnb's Cancellation Policies," NBER Working Papers 28878, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:28878
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    More about this item

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality

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