It’s only pixels, badges, and stars: On the economic value of reputation on Airbnb

Abstract: Trust is a crucial prerequisite for peer-to-peer rental and sharing. Therefore, platform operators such as Airbnb have implemented a host of trust-building mechanisms, user interface (UI) artefacts, and reputation systems. While the role of reputation systems for establishing trust is well-understood, little is known about how reputation actually translates into tangible economic value. In this paper, we thus consider the economic value of trust artefacts on Airbnb by quantifying price effects of common reputation features from a signalling theory perspective. Our analysis is based on a large-scale dataset from 86 German cities and hedonic price modelling. We find that index signals such as the hosts’ rating scores, duration of membership, and Superhost status provide economic value. Moreover, also conventional signals such as accommodation photographs consistently translate into price premiums. We discuss implications for platform operators, users, and the general design of IS artefacts intended to facilitate peer-to-peer platform interactions.