The tragedy of your upstairs neighbors
Apostolos Filippas, John J. Horton
Status: R&R at Journal of Public Economics
Published: Proceedings of the 2017 ACM Conference on Economics and Computation: 537-538 (2017)
Last updated: 2017-06-26
Summary
Peer-to-peer rental markets for short-term accommodation enable “hosts” to rent out properties to “guests.” A common critique of such markets is that hosts benefit at the expense of their unwitting neighbors on whom they impose costs, potentially creating a market failure that justifies policy intervention. In this paper we examine four policy regimes that differ in the allocation of the decision right to become a host. We consider the market outcomes when hosting decisions are made by (1) individual tenants that maximize their revenue, (2) building owners that consider only rents from long-term rentals, (3) cities that consider the surplus of all city residents, and (4) a social planner that takes into account the surplus of both city residents and guests. We find that the equilibrium where tenants are allowed to individually decide has too much hosting, whereas city-specific policies result in too little hosting. The efficient social planner’s solution is equivalent to the equilibrium where building owners decide. We conclude with a discussion of our results and lay out directions for future research.
Paper links
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Coverage
The hot pink emoji house and the problem of Airbnb neighbors from hell, The Guardian
Cite
@inproceedings{horton2017thetragedyofyourupstairsneighbors,
title = {{The Tragedy of Your Upstairs Neighbors: Is the Airbnb Negative Externality Internalized?}},
author = {Filippas, Apostolos and Horton, John J.},
booktitle = {Proceedings of the 2017 ACM Conference on Economics and Computation},
year = {2017},
pages = {537-538},
doi = {10.1145/3033274.3085097},
url = {https://doi.org/10.1145/3033274.3085097}
}