Understanding Peer-to-Peer, Two-Sided Digital Marketplaces: Pricing Lessons from Airbnb in Barcelona

Abstract

Peer-to-peer, two-sided digital marketplaces are reshaping the way in which consumers exchange products and interact with brand value propositions, particularly in the travel and tourism industry. Within the dynamics of these marketplaces, pricing approaches are of the utmost importance; yet, in contrast to conventional digital marketplaces, prices are set by non-professional vendors who are also consumers. We contribute to research on the topic by examining pricing within a single peer-to-peer, two-sided marketing platform: Airbnb. We use a large dataset covering accommodation listed by non-professional hosts in Barcelona, Spain. We identify a range of intrinsic and extrinsic attributes of the value propositions of Airbnb peer-to-peer accommodation, which enables us to explain differences in price levels. The paper offers evidence that higher accommodation prices are best explained by guests’ preference for the intrinsic functional qualities of the value proposition; and that the systematic interaction of valence and volume of online reviews can produce a crucial impact on pricing.