Multimethod study reveals how eliminating consumer screening alters pricing and demand in sharing economy platforms, suggesting targeted governance improves social welfare.
Key Points
To determine how a service provider's decision to forgo consumer screening affects market pricing, demand, platform profitability, and total social welfare in the sharing economy.
Formulated a game-theoretic model to analyze competitive pricing, demand distribution, and profits between competing service providers under different screening policies.
Empirically tested and validated the analytical model's predictions using observational market data from Airbnb listings.
Forgoing consumer screening prompts aggressive pricing responses from rival hosts, causing low-rating focal providers to lower their service prices despite becoming more accessible.
Eliminating screening does not increase demand for high-rating providers, but it does increase consumer demand for their rival hosts.
In highly competitive markets, eliminating screening increases profits for both providers and the platform, though platform-level screening designs can prioritize platform revenue over social welfare when low-rating hosts drop screening against high-rating rivals.