Sharing Economy and Regulatory Uncertainty: The Effect of Complementor Type on a Platform Performance
Katia Meggiorin, a 5th year PhD candidate at NYU Stern (2021-2022), studies the impact of government regulations on competitive strategies in the sharing economy.
Platform markets must attract both supply- and demand-side users to succeed. To this end, platforms subsidize one side of the market, and reduce information asymmetry among users. The sharing economy shows that it is increasingly important to also consider the role of regulations. Indeed, while the sharing economy has enjoyed rapid growth, its exploitation of private resources for economic purposes has led to negative spillovers for the society. Many cities across the U.S. have started to regulate the sharing economy by limiting the supply of products offered on sharing economy platforms. Providers unable to comply with regulatory requirements are left with the choice of exiting the platform or accepting the risk of a fine and remaining, despite this being illegal. Therefore, even when regulations do not regulate a sharing economy platform directly, they may nevertheless strongly affect a platform’s performance by changing the quantity and type of users on the platform. Thus, in my research I investigate the interdependence between a platform, its providers, and regulations to understand how regulations affect the composition of a platform’s supply-side.
I use Airbnb data to answer this question. I collected daily data on Airbnb listings in seven major U.S. cities. Each of those cities regulated its short-term rental market, without regulating the Airbnb platform. The detailed data collected include listings’ textual data and multiple performance measures before and after the regulatory changes. Using nested logit models, I identify dimensions of the platform-provider relationship that predict the likelihood of any provider to not comply with regulations and remain on the platform; as well as the dimensions that predict different noncompliant behaviors. I then use a difference-in-differences model to determine which noncompliant behavior leads to a stronger decrease of a provider’s intensity of participation in the platform market.
Among the most interesting results, I find that more professional providers (i.e., providers investing more time and resources on the platform) are more likely to stay despite noncompliant with regulations. Thus, exit rates after regulating the sharing economy are appear to be higher among micro-businesses, contrarily to the goals of most of the observed regulatory changes.
