28 Jan 2014Working Paper Summaries

Digital Discrimination: The Case of Airbnb.com

by Benjamin G. Edelman and Michael Luca

To build trust and facilitate transactions, online marketplaces present information not only about products, but also about the people offering the products. Many platforms now allow sellers to present personal profiles, post pictures of themselves, and even link to their Facebook accounts. While these features serve the laudable goals of building trust and accountability, they can also bring unintended consequences: Personal profiles may facilitate discrimination. Benjamin G. Edelman and Michael Luca investigate the extent of racial discrimination against hosts on the popular online rental marketplace Airbnb.com. They construct a data set combining pictures of all New York City landlords on Airbnb with their rental prices and information about characteristics and quality of their properties. The authors use this data to measure differences in outcomes according to host race. Nonblack hosts are able to charge approximately 12 percent more than black hosts, holding location, rental characteristics, and quality constant. Moreover, black hosts receive a larger price penalty for having a poor location relative to nonblack hosts. These differences highlight the risk of discrimination in online marketplaces, suggesting an important unintended consequence of a seemingly-routine mechanism for building trust. Key concepts include:

Online marketplaces have the potential to reduce discrimination by facilitating more arms-length transactions. However, social platforms such as Airbnb.com, a popular online marketplace for short-term rentals, may have the opposite effect.
This paper investigates the differences in prices of properties from hosts of varying races. Non-black hosts charge approximately 12% more than black hosts for comparable properties.
Online marketplaces should think carefully about whether, and why, the looks of buyers and sellers should be relevant to the purchase at hand.
Airbnb might consider eliminating or reducing the prominence of host photos. It is not clear what beneficial information these photos provide, while they risk facilitating discrimination by guests.

Author Abstract

Online marketplaces often contain information not only about products, but also about the people selling the products. In an effort to facilitate trust, many platforms encourage sellers to provide personal profiles and even to post pictures of themselves. However, these features may also facilitate discrimination based on sellers' race, gender, age, or other aspects of appearance. In this paper, we test for racial discrimination against landlords in the online rental marketplace Airbnb.com. Using a new data set combining pictures of all New York City landlords on Airbnb with their rental prices and information about quality of the rentals, we show that non-black hosts charge approximately 12% more than black hosts for the equivalent rental. These effects are robust when controlling for all information visible in the Airbnb marketplace. These findings highlight the prevalence of discrimination in online marketplaces, suggesting an important unintended consequence of a seemingly routine mechanism for building trust.