Publications
Publications
- June 2022
- American Economic Review
The Welfare Effects of Peer Entry in the Accommodation Market: The Case of Airbnb and the Accommodation Industry
By: Chiara Farronato and 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 U.S. 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 Year's 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
Peer To Peer; Airbnb; Digital Platforms; Market Entry and Exit; Competition; Accommodations Industry
Citation
Farronato, Chiara, and Andrey Fradkin. "The Welfare Effects of Peer Entry in the Accommodation Market: The Case of Airbnb and the Accommodation Industry." American Economic Review 112, no. 6 (June 2022): 1782–1817.