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In my research I look at the ever-increasing interdependence between the digital and the analog world to uncover how digital platforms deal with the negative externalities that they produce for society, which often become regulatory constraints for these platforms. For example, in my job market paper, I focus on the sharing economy to understand how platforms like Airbnb can sustain their performance despite their providers--i.e., the Airbnb hosts--in large part do not comply with the law. The platform literature would suggest that Airbnb, and other sharing economy platforms, are better off keeping all their providers, regardless of their level of compliance with the law. This is because the more providers a platform has, the more consumers will be motivated to join the platform, thus increasing the opportunity for transactions among users on different sides of the platform market, hence increasing the platform performance. Instead, I find that platform’s performance is higher when the platform helps the regulator to enforce the law. This is because noncompliant providers disengage from the platform, hence completing fewer transactions after the regulatory change. However, platform performance increases when the platform invests on compliant providers, as they significantly increase their engagement with and transaction rates on the platform after the change in law. |
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