Value for Money and Selection: How Pricing Affects Airbnb Ratings

Christoph Carnehl, Maximilian Schaefer, Andre Stenzel and Kevin Ducbao Tran

No 684, Working Papers from IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University

Abstract: We investigate the impact of prices on ratings using Airbnb data. We theoretically illustrate two opposing channels: higher prices reduce the value for money, worsening ratings, but they increase the taste-based valuation of the average traveler, improving ratings. Results from panel regressions and a regression discontinuity design suggest a dominant value-for-money effect. In line with our model, hosts strategically complement lower prices with higher effort more when ratings are relatively low. Finally, we provide evidence that, upon entry, strategic hosts exploit the dominant value-for-money effect. The median entry discount of seven percent improves medium-run monthly revenues by three percent.

Date: 2022
New Economics Papers: this item is included in nep-pay and nep-reg
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Related works:
Working Paper: Value for Money and Selection: How Pricing Affects Airbnb Ratings (2024)
Working Paper: Value for Money and Selection: How Pricing Affects Airbnb Ratings (2023)
Working Paper: Value for Money and Selection: How Pricing Affects Airbnb Ratings (2022)
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