Sharing is Competing: A Cross-Platform Empirical Analysis on Airbnb and HomeAway

Abstract

[eng] We examine the implications of price competition and consumer behavior across online platforms in the sharing economy. The sharing economy is comprised of a variety of peer-to-peer lending services, however, our focus is strictly fixed on two short-term rental platforms, HomeAway (VRBO) and Airbnb. We find that the evidence pertaining to interactions across digital platform competitors is insufficient. Our research intends to fill in this gap of previous literature. In order to understand the competitive relationship and the consumer’s behavior, we study one specific change in the platform’s policy. Due to the large amount of monetary modifications that have occurred throughout the history of the two platforms, a comprehensive investigation of internet archives was performed. After ruling out other changes that were affected by another, simultaneous change, we select the HomeAway (VRBO). On January 28th, 2018, HomeAway (VRBO) applied a change to their fee, a 25% increase for a host subscription to the platform. Furthermore, we concentrate our sample size by selecting the country of Germany; this allowed for a cleaner estimation due to ongoing government policy changes in other countries throughout Europe. We then use a Differences-in-Differences regression model to estimate the effects of the change by comparing two different time periods – six months before and six months after the so-called shock. The results of our study show that, despite the increase in competition due to a reduction in searching costs, consumers are assuming the platform fee increase. This thesis can contribute to future policy recommendations, as in the clarification of directions for platform regulation.