How Algorithmic Regulation Affects Sharing Markets: Analysis Using a Quasi-Natural Experiment

Sharing markets have been associated with several unintended consequences, and policy makers have formulated a range of interventions. As a response, platform-owners resort to a wide range of strategies. We examine the impact of algorithmic regulation on both matching, as well as market exit in the largest home-sharing market using a quasi-natural experiment. We find that algorithmic regulation led to both a decrease in matches, as well as an increase in the likelihood of market exit for the affected listings. We provide evidence that not all listings experience same effects; listings owned by hosts who own reputation badges experience greater drop in matches. In contrast, we find that listings owned by hosts who own reputation badges are not highly likely to exit the market than other listings. We discuss the ability of sharing platforms to exercise control over market design, as well as implications for policy makers and market designers.