- 25 Jan 2016
- Working Paper Summaries
Racial Discrimination in the Sharing Economy: Evidence from a Field Experiment
Overview — Online platforms such as Airbnb create new markets by eliminating search frictions, building trust, and facilitating transactions. With the rise of the sharing economy, however, comes the prospect of racial discrimination that is unheard of in established platforms. The authors suggest changes to Airbnb’s site design to reduce or prevent discrimination.
Online marketplaces increasingly choose to reduce the anonymity of buyers and sellers in order to facilitate trust. We demonstrate that this common market design choice results in an important unintended consequence: racial discrimination. In a field experiment on Airbnb, we find that requests from guests with distinctively African-American names are roughly 16% less likely to be accepted than identical guests with distinctively White names. The difference persists whether the host is African American or White, male or female. The difference also persists whether the host shares the property with the guest or not, and whether the property is cheap or expensive. Discrimination is costly for hosts who indulge in it: hosts who reject African-American guests are able to find a replacement guest only 35% of the time. On the whole, our analysis suggests a need for caution: while information facilitates transactions, it also facilitates discrimination.