Speaker:  Sonia Jaffe  (Microsoft)

Title: Quality Externalities on Platforms: The Case of Airbnb

Abstract:  We explore quality externalities on platforms: when buyers have limited information, a seller’s quality affects whether her buyers return to the platform, thereby impacting other sellers’ future business. We propose an intuitive measure of this externality, applicable across a range of platforms. Guest Return Propensity (GRP) is the aggregate propensity of a seller’s customers to return to the platform. We validate this metric using Airbnb data: matching customers to listings with a one standard deviation higher GRP causes them to take 17% more subsequent trips. By directing buyers to higher-GRP sellers, platforms may be able to increase overall seller surplus. (Joint work with Peter Coles, Steven Levitt, and Igor Popov.)