Short-term rental and its regulations on the home-sharing platform

Abstract

Home-sharing platforms, such as Airbnb, Inc., serve as a peer-to-peer (P2P) marketplace for users to rent out empty lodging spaces to others for a short-term period. The concerns over the disruptive nature of such home-sharing platforms, particularly on the traditional industries and the neighborhood in which the lodgings are provided, have resulted in lawmakers imposing or considering to impose short-term rental (STR) regulations. This research, which anchors on the public interest theory and the prospect theory, examines the overall effect of STR regulation and identifies effective individual regulatory passages on the supply side of P2P home-sharing platforms. Our subsequent empirical analysis results suggest that the regulatory intervention is less likely to restrain the growth of the home-sharing economy in the long-run even though there is a short-term deterrent effect of STR regulation on new entrants to the market. Different regulatory passages exert varying effects on the new entrants and the exit of the incumbent hosts. In specific, three regulatory passages, namely, cap, standards, and eviction restrictions, have a parsimonious effect on containing both the new listing and the delisting. This study not only advances our understanding of the emergent sharing economy in the space of STR services but also provides insights into the effectiveness of STR regulatory passages in containing STR activities.