Working Paper: NBER ID: w24361
Authors: Chiara Farronato; Andrey Fradkin
Abstract: We study the effects of enabling peer supply through Airbnb in the accommodation industry. We present a model of competition between flexible and dedicated sellers - peer hosts and hotels - who provide differentiated products. We estimate this model using data from major US cities and quantify the welfare effects of Airbnb on travelers, hosts, and hotels. The welfare gains are concentrated in locations (New York) and times (New Years Eve) when hotels are capacity constrained. This occurs because peer hosts are responsive to market conditions, expand supply as hotels fill up, and keep hotel prices down as a result.
Keywords: Airbnb; peer-to-peer accommodation; consumer surplus; hotel competition; welfare effects
JEL Codes: D4; D6; L1; L22; L23; L85; L86
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| airbnb (Z30) | consumer surplus (D46) |
| airbnb (Z30) | host surplus (Y60) |
| airbnb (Z30) | variable hotel profits (Z30) |
| airbnb (Z30) | total welfare gain (D69) |
| city capacity constraints (R53) | effect of airbnb on hotel revenues (Z30) |
| airbnb (Z30) | hotel revenues (Z30) |
| airbnb (Z30) | hotel prices (Z30) |
| airbnb (Z30) | occupancy rates (R21) |