Regulating the sharing economy: The effects of day caps on short- and long-term rental markets and stakeholder outcomes

Gauß, Patrick; Gensler, Sonja; Kortenhaus, Michael; Riedel, Nadine; Schneider, Andrea


Abstract

Home sharing platforms have experienced a rapid growth over the last decade. Following negative publicity, many cities have started regulating the short-term rental market. Regulations often involve a cap on the number of days a property can be rented out on a short-term basis. We draw on rich data for short-term rentals on Airbnb and for the long-term rental (long-term rental) market to examine the impact of short-term rental regulations with a day cap on various stakeholders: hosts, guests, the platform provider, and residents. Based on a difference-in-differences design, we document a sizable drop in Airbnb activity. Interestingly, not only targeted hosts (i.e., hosts with reservation days larger than the day cap), but also non-targeted hosts reduce their Airbnb activity. The reservation days of non-targeted hosts decrease between 26.27% and 51.89% depending on the treatment. Targeted hosts experience a similar decline. There is, nevertheless, significant non-compliance: more than one third of hosts do not comply with enacted short-term rental regulations. Additional analyses show that few properties are redirected from short-term rental to long-term rental use and that there is no significant drop in long-term rents. Drawing on a theoretical model, we tie the estimated effects to changes in stakeholders’ welfare: Regulations significantly reduce the welfare of hosts, and the loss ranges between -46.30% and -9.02%. The welfare loss of the platform provider is proportional to the loss of the hosts. Welfare of guests decreases moderately ranging between -4.5% to -4.1%. The welfare of residents increases minimal. These results question the effectiveness and desirability of the studied short-term rental regulations.

Keywords
Sharing Economy; Quasi-Experiments; Public Policy; Airbnb; Regulations



Publication type
Research article (journal)

Peer reviewed
Yes

Publication status
Published

Year
2024

Journal
Journal of the Academy of Marketing Science

Volume
52

Start page
1627

End page
1650

Language
English

ISSN
0092-0703

DOI

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