Price Determinants on Airbnb: How Reputation Pays Off in the Sharing Economy

Trust is a crucial prerequisite for peer-to-peer rental and sharing. Therefore, platform operators such as Airbnb have implemented a plethora of trustbuilding mechanisms, user interface (UI) artefacts, and reputation systems. While the role of reputation systems for establishing trust is well-understood, little is known about how reputation actually translates into tangible economic value, either by attracting more demand or by enabling the enforcement of higher prices. In this paper, we consider the economic value of trust-building artefacts on Airbnb by quantifying price effects of common reputation features from a signaling theory perspective. Our analysis is based on hedonic price modeling and a large-scale dataset from 86 German cities that provides insights in the price effects of a diverse set of variables (average rating score, number of ratings, Superhost status, ID verification, photos, and duration of membership). Employing hedonic price regression modeling, we find that index signals such as the hosts’ rating scores and duration of membership are associated with economic value. Moreover, also conventional signals such as accommodation photographs consistently translate into price premiums. We discuss implications for platform operators, users, and the general design of Information Systems (IS) artefacts intended to facilitate peer-to-peer platform interactions.