Mardi | 2019-03-19
Salle des Thèses 16h – 17h20
We construct a search model where sellers post prices and produce goods of unknown quality. A match between a buyer and a seller reveals the quality of the seller. We look at the pricing decisions of the sellers in this environment. We then introduce a rating system whereby buyers reveal the seller’s type by giving them a “star” if they are a high quality seller. We show that new sellers charge a low price to attract buyers and if they receive a star they post a high price. Furthermore, high quality sellers sell with a higher probability than new sellers. We show that welfare is higher with a ratings system. Using data on Airbnb rentals to compare the pricing decisions of Superhosts (elite rentals) to non-Superhosts we show that Superhosts: 1) charge higher prices, 2) have a higher occupancy rate and 3) higher revenue than non-Super hosts.