Chiara Farronato - Faculty & Research - Harvard Business School
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Chiara Farronato

Assistant Professor of Business Administration

Technology and Operations Management

Chiara Farronato is an assistant professor of business administration in the Technology and Operations Management Unit. She draws from the fields of industrial organization and technology to study the economics of innovation and the Internet.

In her research, Professor Farronato focuses on the market design of peer-to-peer online platforms. Her work has been cited by media outlets including Bloomberg Businessweek, The Huffington Post, The Economist, and FT Magazine.

Professor Farronato received her PhD in economics from Stanford University. She earned an MSc in economics in a joint program of Bocconi University in Italy and the Catholic University of Louvain in Belgium; her bachelor’s degree is also from Bocconi University.

Journal Articles
  1. Auctions versus Posted Prices in Online Markets

    Liran Einav, Chiara Farronato, Jonathan Levin and Neel Sundaresan

    Auctions were very popular in the early days of internet commerce, but today online sellers mostly use posted prices. We model the choice between auctions and posted prices as a trade-off between competitive price discovery and convenience. Evidence from eBay fits the theory: auctions are favored by less experienced sellers and for idiosyncratic products, and auction listings sell at a discount but with higher probability relative to comparable posted price listings. We then show that the decline in auctions was not driven by changes in the type of sellers and items. Instead, seller incentives changed. We estimate the demand facing individual sellers at different points in time and document falling sale probabilities and a fall in the relative demand for auctions. Both favor posted prices; our estimates suggest the latter is more important for explaining the shift away from auctions. We provide supporting evidence from a survey of eBay sellers and discuss why sellers might use a mix of auctions and posted prices in order to price discriminate.

    Keywords: Online Technology; Auctions; Price;

    Citation:

    Einav, Liran, Chiara Farronato, Jonathan Levin, and Neel Sundaresan. "Auctions versus Posted Prices in Online Markets." Journal of Political Economy 126, no. 1 (February 2018): 178–215.  View Details
  2. Peer-to-Peer Markets

    Liran Einav, Chiara Farronato and Jonathan Levin

    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;

    Citation:

    Einav, Liran, Chiara Farronato, and Jonathan Levin. "Peer-to-Peer Markets." Annual Review of Economics 8 (2016): 615–635.  View Details
Working Papers
  1. Outsourcing Tasks Online: Matching Supply and Demand on Peer-to-Peer Internet Platforms

    Zoë Cullen and Chiara Farronato

    This paper studies the growth of online peer-to-peer markets. Using data from TaskRabbit, a rapidly expanding marketplace for domestic tasks, we show that growth is highly heterogeneous across cities, which is a common feature of peer-to-peer markets for local services. To disentangle the potential drivers of growth, we present a general model of a frictional market for services, and estimate it using variation in the number of buyers and sellers present on the marketplace over time and across cities. First, we find that supply is highly elastic: in periods when demand doubles, sellers work almost twice as hard, prices hardly increase and the probability of requested tasks being matched only slightly falls. The first result implies that in markets where supply can accommodate wide fluctuations in demand, growth relies on attracting buyers at a faster rate than sellers. Second, we show that cities where the market fundamentals promote efficient matching of buyers and sellers are also the cities that grow fast in the number of buyers. This heterogeneity in matching efficiency is not attributable to scale economies, but is instead related to two measures of market thickness: geographic density (buyers and sellers living close together), and level of task standardization (buyers requesting homogeneous tasks). The second result implies that when network effects are limited by the local and time-sensitive nature of the services exchanged, growth of peer-to-peer markets largely depends on strategic geographic expansion.

    Keywords: two-sided market; two-sided platforms; platform strategy; sharing economy; Online Technology; Market Platforms; Market Design;

    Citation:

    Cullen, Zoë, and Chiara Farronato. "Outsourcing Tasks Online: Matching Supply and Demand on Peer-to-Peer Internet Platforms." Working Paper, February 2018.  View Details
  2. The Welfare Effects of Peer Entry in the Accommodation Market: The Case of Airbnb

    Chiara Farronato and Andrey Fradkin

    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 from Airbnb 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; accomodations industry; Market 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." NBER Working Paper Series, No. 24361, February 2018.  View Details
Cases and Teaching Materials
  1. Marriott International: The Next 90 Years

    Chiara Farronato and Gary Pisano

    The case examines how Marriott should respond to the potential threats from new home-sharing platforms and the rise of online travel agencies. In 2017 Marriott was the largest hotel chain, with more than one million rooms and 7% of worldwide room supply. In the previous decade the growing ubiquity of internet-based commerce had facilitated the rise of technology platforms such as Expedia and Airbnb. The case enables students to explore the forces that might lead to industry transformation and the appropriate response strategies of a large incumbent.

    Keywords: Airbnb; competitiveness; threats; disruption; Lodging Industry; long-term growth; Loyalty program; Marriot; online platforms; online travel agencies; Two-Sided Platforms; Disruptive Innovation; Tourism Industry; Travel Industry;

    Citation:

    Farronato, Chiara, and Gary Pisano. "Marriott International: The Next 90 Years." Harvard Business School Case 618-017, September 2017. (Revised November 2017.)  View Details