| Abstract: |
Do rating systems provide incentives to sellers when they are about to exit a
market? Using data from Airbnb, this paper examines how end-of-game
considerations affect hosts’ effort decisions. We take advantage of a
regulation on short-term rentals in the City of Los Angeles to identify hosts
who anticipated their imminent exit from the platform due to non-compliance
with new eligibility rules. We focus on hosts who left the platform as a
result of the regulation and measure their effort with listing’s ratings in
effort-related categories such as check-in, communication and cleanliness.
With a Difference-in-Differences and Event Study approach, we compare how
listing’s effort-related ratings changed, compared to ratings on location,
after the regulation announcement and during its implementation. We document a
statistically significant decrease in effort in the last periods of the hosts’
career. Our findings provide insights for platform managers, highlighting the
adverse effects of end-of-game considerations on how rating systems affect
sellers’ incentives for the provision of high-quality services. |