This study aims to investigate the relationship between Airbnb and long-term residential rents, using Santa Monica, California, as a case study. In 2015, Santa Monica adopted the home sharing ordinance (HSO), a stringent regulation aimed at restricting short-term rentals (STR). I employ the synthetic control method to a panel comprising Airbnb listings and residential rents from multiple cities in Los Angeles County. This approach is used to estimate the causal effects of Santa Monica’s HSO on Airbnb listings and residential rents. My results show a 60% reduction in Airbnb listings in Santa Monica within two years of implementing the ordinance. Despite this significant decrease, the effect of the regulation on rents was not significant. Suggestive evidence indicates that the ordinance’s ineffectiveness in increasing the number of houses allocated to long-term tenants may have contributed to its negligible impact on rental rates. This study reveals a scenario where a marked decrease in Airbnb activity did not lower residential rents, highlighting the need for context-specific evaluations of the relationship between STRs and local housing dynamics.

This study estimates the impact of Airbnb on housing prices and residential mobility in Madrid from 2010 to 2018. Using a comprehensive dataset that includes Airbnb activity, housing prices, and residential moves at the neighborhood-year level, I employ a shift-share instrumental variable approach that leverages variation in neighborhoods’ attractiveness to tourists and Airbnb’s rapid growth. My findings indicate that, on average, an increase of 100 Airbnb listings in a neighborhood leads to a 2% rise in housing prices and a corresponding decrease in the number of new residents moving into the neighborhood. Furthermore, results from a causal mediation analysis using the same instrumental variable reveal that the negative effect of Airbnb on residential inflows is primarily driven by its impact on house prices. Consistent with this result, the reduction in residential inflows caused by Airbnb’s impact on house prices is predominantly driven by residents without a college degree. Together, these findings suggest that short-term rental platforms may trigger or intensify gentrification processes.

Evidence from surveys and lab experiments suggests that people’s propensity to conform to the opinion of others is lower in more individualistic cultures. Do these findings hold in real-world settings? This paper quantifies the role of culture as a determinant of social influence in the context of online consumer reviews. Exploring discontinuities in the way Tripadvisor displays average ratings, I estimate how reviewers from different countries respond to the average opinion of past consumers. A discontinuous increase of 0.5 stars in a restaurant’s average rating leads reviewers from countries with the least individualistic cultures to report ratings that are 0.1 stars higher. The size of the effect reduces in individualism and becomes statistically insignificant for consumers from the most individualistic cultures. The negative relationship between individualism and reviewers’ tendency to conform cannot be explained by country-level predictors of individualism, such as income or religion. Moreover, cross-regional variation within Italy reveals that the correlation between cultural values and social influence also holds across reviewers from different regions within the same country. These findings imply that average ratings converge faster to firms’ real quality when reviewers are from more individualistic cultures. (PDF available upon request)

This article studies the impacts of online reviews on firm dynamics and consumer welfare in the context of the restaurant industry. Preliminary evidence suggests that restaurants that get reviews early are likely to survive, while entrants with few reviews exit early. To explore a potential explanation, I build a model featuring firms of heterogeneous quality facing static pricing decisions and dynamic entry and exit choices. Imperfectly informed consumers are modeled under the rational inattention framework. They use aggregate information provided by online reviews to form priors regarding quality but can also process additional information at a cost. If the cost to process information is high enough, young firms have to operate at very low profits even if they have high quality. The model highlights that the overall impact of online review websites depends on their effect on consumers’ prior beliefs and on the cost of obtaining information from other sources.