The exhaustion of the herding effect in peer-to-peer accommodation

Abstract

A significant reason for the concentration of demand in a subset of the supply in the peer-to-peer market for tourist accommodation is herding behavior, by which the decisions of the first guests are imitated by those who follow. This article proposes a profit- and utility-maximization microeconomic model and implements it with data of Airbnb listings corresponding to 10 European cities. Results show that the influence of each additional review is positive but decreasing, inducing a more balanced distribution of demand among offered accommodation and thus dampening the herding effect. Moreover, reservation policy—specifically, enabling the instant booking option—is a key to explain the initial push that accommodations need to be demanded now and, hence, to increase their possibilities of being demanded in the future.