Platform as a Rule Maker: Evidence from Airbnb's Cancellation Policies
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.
We thank Chiara Farronato, Hui Li, Alessandro Gavazza, Martin Gaynor, Maryam Saeedi, Robert Miller, Sylvia Hristakeva, Marvin Lieberman, Martin Peitz and seminar attendants at UCLA, Carnegie Mellon University and University of Mannheim for constructive comments. We are grateful to our home universities for providing financial support for access to the AirDNA data. None of us has a significant financial relationship with Airbnb.com or any other short-term rental platforms. All rights reserved. All errors are our own. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.