Essays on the Airbnb Market: Superhosts and Local Policy Determinants and Effects

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Smith, Joshua Philip
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Middle Tennessee State University
This dissertation is composed of three distinct empirical analyses, separated by chapter. Chapter I examines the impact that salient information has on host and guest decisions in the sharing economy using data from Airbnb from December 2018 to April 2019. Airbnb’s Superhost badge offers a shortcut to consumers searching for high-quality sellers. By estimating the impact of acquiring the badge separately from the conditions that Airbnb uses to merit Superhosts, I isolate the effect of salience of the information the badge carries via OLS and fixed effect panel models. The result is a negligible increase in price by sellers, but a growing effect on the number of reviews, 0.10 and 0.27, one and two months after earning the badge, respectively. I estimate the effect on revenues is between 10% to 17% increase from increased bookings by guests. Chapter II asks why local governments pass restrictions on short-term rentals, such as Airbnb. I construct a novel classification of these laws passed by cities. I use panel binary probits and ordered models to predict the marginal effects of local economic conditions on short-term rental restrictions using data from 2012 to 2019 in nineteen U.S. cities. I find that a one standard deviation decline in housing affordability leads to a 20.57 percentage point increase in the likelihood that a city council restricts in a specific approach that only personal residences may be operated as a short-term rental. Alternatively, a one standard deviation increase in affordability predicts a 23.78 percentage point increase in the likelihood that no restrictive policy is passed. Chapter III identifies the effect of policies aimed at reducing short-term rental supply. I use fixed effects panel models with five years of data from Airbnb to show the casual response of professional and nonprofessional suppliers in the United States from changes enacted through city law. I find these restrictions do little to reduce professional supply but significantly affect nonprofessional hosts, reducing availability by as much as -15.7%. A 1 percent increase in permit fees leads to a -0.7 percentage point decrease in professional's supply. Yet for nonprofessionals, the same 1 percent increase leads to a percentage point increase of 1 to 1.2 percentage points in supply. My paper expands the limited and conflicting empirical research of local policy aimed at short-term rentals by offering robust methods to disentangle the heterogeneous effects by host type.