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The Tragedy of your Upstairs Neighbors: Is the Negative Externality of Airbnb Internalized?

Published: 20 June 2017 Publication History

Abstract

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.

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Cited By

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  • (2024)The uneven effect of Airbnb on the housing market: Evidence across and within Italian citiesJournal of Regional Science10.1111/jors.12737Online publication date: 27-Nov-2024
  • (2022)Factors affecting short-term rental first price: A revenue management modelFrontiers in Psychology10.3389/fpsyg.2022.99491013Online publication date: 16-Nov-2022
  • (2022)How Short-Term Rentals are Changing the NeighborhoodInternational Regional Science Review10.1177/0160017621105998145:4(417-443)Online publication date: 26-Mar-2022
  • Show More Cited By

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cover image ACM Conferences
EC '17: Proceedings of the 2017 ACM Conference on Economics and Computation
June 2017
740 pages
ISBN:9781450345279
DOI:10.1145/3033274
Permission to make digital or hard copies of part or all of this work for personal or classroom use is granted without fee provided that copies are not made or distributed for profit or commercial advantage and that copies bear this notice and the full citation on the first page. Copyrights for third-party components of this work must be honored. For all other uses, contact the Owner/Author.

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Association for Computing Machinery

New York, NY, United States

Publication History

Published: 20 June 2017

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Author Tags

  1. negative externalities
  2. online platforms
  3. public policy

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EC '17
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EC '17: ACM Conference on Economics and Computation
June 26 - 30, 2017
Massachusetts, Cambridge, USA

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Overall Acceptance Rate 176 of 611 submissions, 29%

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EC '25
The 25th ACM Conference on Economics and Computation
July 7 - 11, 2025
Stanford , CA , USA

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Cited By

View all
  • (2024)The uneven effect of Airbnb on the housing market: Evidence across and within Italian citiesJournal of Regional Science10.1111/jors.12737Online publication date: 27-Nov-2024
  • (2022)Factors affecting short-term rental first price: A revenue management modelFrontiers in Psychology10.3389/fpsyg.2022.99491013Online publication date: 16-Nov-2022
  • (2022)How Short-Term Rentals are Changing the NeighborhoodInternational Regional Science Review10.1177/0160017621105998145:4(417-443)Online publication date: 26-Mar-2022
  • (2021)The Impact of Airbnb on Residential Property Values and Rents: Evidence from PortugalRegional Science and Urban Economics10.1016/j.regsciurbeco.2021.103667(103667)Online publication date: Mar-2021
  • (2018)Open Design, Inclusivity and the Intersections of MakingProceedings of the 2018 Designing Interactive Systems Conference10.1145/3196709.3196718(173-186)Online publication date: 8-Jun-2018
  • (undefined)Airbnb Usage Across New York City Neighborhoods: Geographic Patterns and Regulatory ImplicationsSSRN Electronic Journal10.2139/ssrn.3048397

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