HBS Working Paper Sparks Discussion About Discrimination in Online Marketplaces

A working paper by two Harvard Business School professors published earlier this month, which found that black hosts on the online rental marketplace Airbnb list their properties for approximately 12 percent less than non-black hosts, has sparked discussion about the presence of racial discrimination in online marketplaces.

The study, entitled “Digital Discrimination: The Case of Airbnb.com,” was released in the middle of January by associate professor Benjamin G. Edelman ’02 and assistant professor Michael Luca. After collecting data regarding the price, location, and quality of each of Airbnb’s New York City listings—as well as certain characteristics, including race, of each listing’s host—the authors found that black hosts earn about $17 less than non-black hosts per night, for listings of similar qualities.

Airbnb, which supplies over half a million property listings to renters looking for short-term accommodations in a variety of locations across the world, has grown to a valuation of more than $2.5 billion since its founding in 2008. The site requires hosts to post public profiles—including profile pictures and first names—and places this information alongside property information for a given listing.

In a public statement regarding the study, Airbnb reaffirmed their commitment to a transparent community in which discrimination is prohibited. The statement also offered several criticisms of Edelman and Luca’s methodology, claiming that the year-and-a-half-old data used in the study was antiquated and that the paper focused only on listings in New York City.

“[Edelman and Luca] made a number of subjective or inaccurate determinations when compiling their findings,” the release stated.

Because the Airbnb site does not provide information about demand for a given listing, Edelman and Luca were only able to consider asking price in their analysis of demand for a given listing. While Luca said that their extrapolation from listing price is a valid indicator of discrimination against black hosts, Carla D. Martin ’03, a postdoctoral fellow in the Department of African and African American Studies who studies race and technology, said that the discrepancy in initial asking price is a valuable data point in and of itself.

“These studies show that these are groups that ask for less—that are likely to ask for lower numbers to begin with,” she said, referencing past studies which have studied the initial salaries and salary raises of women and people of color. “We may be seeing something like this playing out on the Airbnb side of things.”

In order to reduce the number of instances of discrimination in its marketplace, Luca said Airbnb might replace a host’s profile picture with a word cloud of personal characteristics or move the picture to a less prominent position on the listing page.

“There are examples of successful platforms such as eBay that don't contain pictures of the person who is trying to sell you a good,” he said. “We don’t see any immediate reason why you need a picture to facilitate a transaction.”

In the future, Luca and Edelman aspire to work directly with platforms, including Airbnb, to develop mechanisms to minimize discrimination in online market transactions.

Regardless of Airbnb’s design decisions, the consideration of racial issues in an array of online platforms is becoming more and more necessary as society is uploaded to the internet, Martin said.

“People are replicating society online in important ways, and, because racism exists in offline society, it very naturally extends to social uses in digital spaces,” she said. “Dealing with race is an increasingly important issue that these social media sites have to face—in addition to gender, ethnicity, and other social differences.”

—Staff Writer Alexander H. Patel can be reached at alexanderpatel@college.harvard.edu