Trust in peers or in the institution? A decomposition analysis of Airbnb listings’ pricing

Abstract

ABSTRACT The present paper examines whether Airbnb listing prices differ significantly between ‘casual’ hosts and hosts with multiple listings, regarded as professionals. To this effect the Airbnb apartment market in Athens (Greece) is used as a case study. Drawing on a sample of about 3.500 Airbnb apartments listed in May 2017, the study employs, first, typical hedonic price modelling to assess the determinants of listings’ price of both groups, and then it uses the Blinder–Oaxaca decomposition methodology to examine whether there is a price gap between casual and professional hosts, the characteristics that cause this price gap and their relative contribution to it. The research finds a statistically significant difference in the Airbnb pricing between casual and professional hosts, where about a half of the price gap is attributed to the ‘better’ listings that professionals manage (in terms of size, availability of amenities and locational attributes), and a half to the different reaction hosts have towards specific Airbnb characteristics. In particular, professionals value higher (i.e. place more trust on) the Superhost badge issued by Airbnb as an institution, whereas casual hosts place trust on (and price accordingly) the evaluations provided by the guests.