Wednesday, October 25, 2017

An Empirical Analysis of Platform Regulation in the Sharing Economy

Zhijie Lin, Nanjing University - School of Business and Yong Tan, University of Washington - Michael G. Foster School of Business offer An Empirical Analysis of Platform Regulation in the Sharing Economy.

ABSTRACT: The sharing economy, enabled by digital platforms which connect suppliers and consumers for peer-to-peer exchanges, has experienced a rapid growth recently. Although researchers have attempted to explore the societal or business aspects in the sharing economy, regulatory issues have been surprisingly overlooked. We thus analyze how a platform’s self-regulation on suppliers affects suppliers’ sales performance, and the role of four contingent factors, i.e., regulation recency, market competition intensity, product diversity and product price. Using a rich and proprietary data set from a large sharing economy platform which facilitates the exchanges of home-cooked meals in China, and employing multiple identification strategies and estimation methods (i.e., traditional propensity score matching, look-ahead propensity score matching, and difference-in-differences approach), we find robust evidence that a platform’s regulation on a supplier (i.e., a home kitchen/cook) increases the supplier’s sales revenue by 20.7%. Our additional investigations of the contingent factors find that the impact of regulation on sales would be weaker with higher market competition intensity, but stronger with higher product diversity. However, the regulation impact does not vary across different recency or price levels. Our study serves as the first attempt to empirically examine regulatory issues in the sharing economy, and offers important practical implications to platform operators and suppliers.

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