Tag: sharing economy



Dennis Zhang, Assistant Professor of Operations and Manufacturing Management at Olin co-authors an article on HBR, “A Better Way to Fight Discrimination in the Sharing Economy” about their research on potential bias on sites like Airbnb.

“We know discrimination exists in the sharing economy,” said Zhang.  “We wanted to find out how do we prevent it, and how do we mitigate it?”

In a working paper, Zhang and his co-authors, Ruomen Cui, assistant professor at the Kelly School of Business at Indiana University, and Jun Li, assistant professor at University of Michigan’s Stephen M. Ross School of Business, conducted two randomized field experiments among more than 1,200 Airbnb hosts in Boston, Chicago and Seattle. The researchers used fictitious guest accounts and sent accommodation requests to the hosts using those accounts.

They found requests from guests with African American names — based on name frequency data published by the U.S. Census Bureau— were 19 percent less likely to be accepted than those with Caucasian names.

However, when the researchers posted a single host review for each fictitious user, the tables turned: Acceptance rates for both sets of guests evened out. Zhang says this fact shows strong evidence of concept called statistical discrimination with Airbnb.

The researchers conclude that more information about guests, as opposed to less, is important to eliminate potential bias in sharing economy platforms such as Airbnb.

Link to more on this research here.

Link to related story on NPR’s Morning Edition.

 




The sharing economy is a booming industry, with companies such as Uber and Airbnb generating billions in value each year. Technology, combined with informal peer business practice, has made it easier than ever to call for a ride or rent a living space.

However, the sharing economy hasn’t been without its share of controversy, including accounts of discrimination by Airbnb hosts against guests. As a result, Airbnb instituted a new nondiscrimation policy, which included reducing the size of guest photographs in an effort to prevent host bias. However, new research co-authored by a faculty member at Washington University in St. Louis’s Olin Business School shows that more information about guests, as opposed to less, is important in eliminating potential sharing economy bias.

denniszhang

Zhang

“We know discrimination exists in the sharing economy,” said Dennis Zhang, assistant professor of Operations and Manufacturing Management at Olin.  “We wanted to find out how do we prevent it, and how do we mitigate it?”

In a working paper, Zhang and his co-authors, Ruomen Cui, assistant professor at the Kelly School of Business at Indiana University, and Jun Li, assistant professor at University of Michigan’s Stephen M. Ross School of Business, conducted two randomized field experiments among more than 1,200 Airbnb hosts in Boston, Chicago and Seattle. The researchers used fictitious guest accounts and sent accommodation requests to the hosts using those accounts.

They found requests from guests with African American names — based on name frequency data published by the U.S. Census Bureau— were 19 percent less likely to be accepted than those with Caucasian names.

However, when the researchers posted a single host review for each fictitious user, the tables turned: Acceptance rates for both sets of guests evened out. Zhang says this fact shows strong evidence of concept called statistical discrimination with Airbnb.

“When hosts don’t have complete information about a possible guest, they might infer race and make rental decisions based on that,” said Zhang. “When enough information is shared, hosts don’t need to make those inferences, and we found discrimination was statistically eliminated.”

It wasn’t just positive reviews that swayed the hosts. The second portion of the experiment involved a negative review of the fictitious guests. Here, too, the acceptance rates for both sets of names were statistically even: 58.2 percent for Caucasians and 57.4 percent for African Americans.

“We thought a negative review might create distortion for the hosts,” said Zhang. “However, based on our experiments, any and all information about a guest is important to fight discrimination.”

Zhang suggests Airbnb incentivize hosts to write reviews on new users and also provide a more structured way for guests to communicate travel plans in efforts to make the rental transaction much more transparent. He added that at least two of Airbnb’s changes to its nondiscrimination policy last September were proven counterproductive by this multifaceted research.

“Hiding user information and making profile pictures smaller doesn’t solve the problem, and may make it even more severe. Airbnb really has to think about how to provide more information instead of cutting it from guest profiles,” said Zhang.

Guest blogger: Erika Ebsworth Goold, WashU Public Affairs, The Source




The Sharing Economy

Collaborative consumption is an expanding economic force in our country and globally, with consumers sharing everything from cars, bicycles and even agricultural equipment. It happens quickly and efficiently, with a simple click of a button or a swipe of a finger.

Many product-sharing transactions involve renters paying a fee to product owners through an online platform, reaping several inherent benefits to this consumer-to-consumer system: profits for the product owner; lower costs for the user; benefits to the environment.

But how does the explosion in this new business practice affect manufacturers?

New research from Washington University in St. Louis’ Olin Business school shows that the rising tide of product-sharing can indeed lift all economic ships, including those of the product manufacturers, or firms.

Jiang

Baojun Jiang, assistant professor of marketing

“These past few years have seen an enormous growth in sharing,” said Baojun Jiang, assistant professor of marketing at Olin. “There have been discussions in the popular press that found some companies were worried their customers were sharing products, so some of them might not buy the product anymore. So when should companies help facilitate the sharing, when should they not, and what should they do to respond to such a market?”

To answer those questions, Jiang and co-author Lin Tian from Shanghai University of Finance and Economics used an analytical framework to explore the effects of consumer-to-consumer product sharing. The researchers analyzed a firm’s best strategic responses, in terms of pricing and quality decisions, to the consumer’s product-sharing behavior. They find that peer-to-peer sharing can be a win-win situation, with consumers being better off and firms making higher profits, especially for high-cost products such as cars or other major assets. Two main effects appear to counterbalance each other.

“When consumers can share products, some of them may decide not to buy anymore,” Jiang said. “So the firm’s own customers may compete with the firm in this sharing market, cannibalizing some of the firm’s sales.

“But sharing can also have market-expansion effect, because some consumers may decide to buy the product because there is a sharing market — they would not have bought the product if there wasn’t a sharing market,” he said.

“Suppose I use the product, say a car, during weekends only, and I don’t use it during weekdays, because I take the bus to work on weekdays, but on weekends I need cars for recreational activities,” Jiang said. “I might not buy the car before. But now, I can buy the car, and when I don’t use it, I can rent it out and earn some income. In fact, I may even buy a better car or add some upgrade options, because I can also get a higher rental price if I have a better car with upgrades, which I can now afford. The sharing market actually makes the product more valuable to the firm’s customer.”

Jiang said product-sharing among consumers will increase a firm’s profits if that firm strategically adjusts its product quality and price. Some have already realized the benefit of doing just that, and are actively embracing the new economic system.

“Many firms promote product sharing on their websites, informing the consumers that sharing is very easy and there isn’t too much risk but a lot of flexibility,” Jiang said. “Some manufacturers are actually partnering with the product-sharing platforms to reduce the hassle and transaction costs of sharing, because consumers will value the product more, knowing they can generate some income with it, thus, the consumers are less price-sensitive.”

Jiang’s research was recently accepted for publication by Management Science; he can be reached at baojunjiang@wustl.edu.

Visit Research That Impacts Business to read more about new and upcoming Olin research.

 Guest blogger: Erika Ebsworth-Goold, WUSTL Public Affairs