Pricing algorithms on Airbnb don't actually lead to higher prices for travelers.
While algorithmic pricing is known to skyrocket margins in industries like gasoline (up to 38%), this study of eight major U.S. cities found almost no effect on Airbnb prices. It suggests that in markets with many individual sellers, algorithms might actually fail to facilitate the 'price gouging' often seen in simpler markets.
Algorithmic Pricing in a Many-Seller Market: Evidence from Airbnb
SSRN · 6497364
Does algorithmic pricing raise market prices in differentiated-product platform markets? We exploit the platform-wide rollout of Airbnb's redesigned pricing tools on September 1, 2023 using a sharp regression discontinuity in time across eight major U.S. cities (7.5-22.2 million listing-day observations). Point estimates on residualized log prices are positive in all eight cities (sign test p = 0.004; city-level t-test p = 0.019), ranging from 0.5% to 1.9% depending on bandwidth. However, w