Article | Annual Review of Economics | 2016

Peer-to-Peer Markets

by Liran Einav, Chiara Farronato and Jonathan Levin

Abstract

Peer-to-peer markets such as eBay, Uber, and Airbnb allow small suppliers to compete with traditional providers of goods or services. We view the primary function of these markets as making it easy for buyers to find sellers and engage in convenient, trustworthy transactions. We discuss elements of market design that make this possible, including search and matching algorithms, pricing, and reputation systems. We then develop a simple model of how these markets enable entry by small or flexible suppliers and the resulting impact on existing firms. Finally, we consider the regulation of peer-to-peer markets and the economic arguments for different approaches to licensing and certification, data, and employment regulation.

Keywords: peer-to-peer; online platforms; matching; market design; innovation; technology adoption; Network Effects; Market Platforms; Marketplace Matching; Search Technology; Market Entry and Exit;

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Citation:

Einav, Liran, Chiara Farronato, and Jonathan Levin. "Peer-to-Peer Markets." Annual Review of Economics 8 (2016): 615–635.

About the Author

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Chiara Farronato
Assistant Professor of Business Administration
Technology and Operations Management

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