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Value for Money and Selection: How Pricing Affects Airbnb Ratings

Author

Listed:
  • Christoph Carnehl

    (Università Bocconi)

  • André Stenzel

    (Bank of Canada - Bank of Canada)

  • Kevin Ducbao Tran

    (University of Bristol [Bristol])

  • Maximilian Schäfer

Abstract

We investigate the impact of prices on ratings using Airbnb data. We theoretically illustrate two opposing channels: higher prices reduce the value for money, worsening ratings, but they increase the taste-based valuation of the average traveler, improving ratings. Results from panel regressions and a regression discontinuity design suggest a dominant value-for-money effect. In line with our model, hosts strategically complement lower prices with higher effort more when ratings are relatively low. Finally, we provide evidence that, upon entry, strategic hosts exploit the dominant value-for-money effect. The median entry discount of seven percent improves medium-run monthly revenues by three percent.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Christoph Carnehl & André Stenzel & Kevin Ducbao Tran & Maximilian Schäfer, 2024. "Value for Money and Selection: How Pricing Affects Airbnb Ratings," Working Papers hal-04501102, HAL.
    • Handle: RePEc:hal:wpaper:hal-04501102
    DOI: 10.2139/ssrn.4207034
    as

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    JEL classification:

    • D18 - Microeconomics - - Household Behavior - - - Consumer Protection
    • D25 - Microeconomics - - Production and Organizations - - - Intertemporal Firm Choice: Investment, Capacity, and Financing
    • D47 - Microeconomics - - Market Structure, Pricing, and Design - - - Market Design
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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