[DIW Discussion Paper 1888]

Partitioned pricing is a price obfuscation strategy in which the price is split into a base price and add-on fees. While empirical evidence suggests that partitioned pricing affects consumer decisions through salience effects, its consumer welfare consequences are largely unexplored. I provide a quantification of the welfare impact of partitioned pricing on eBay Germany. I employ a discrete choice model that jointly allows for behavioral reactions to marginal changes in the add-on fees as well as a discontinuous effect of a zero fee. I estimate the model parameters using web scraped data of posted price transactions on eBay Germany. The results suggest some under-reaction to marginal changes in the shipping fee and a discontinuous positive effect of free shipping on consumer demand. The combined impact of these effects on consumer welfare is not larger than six percent of consumer surplus.

[DIW Discussion Paper 1889]

Using data from Paris in 2017, we estimate demand for short-term accommodations, explicitly accounting for localized variation in demand across the city. Our counterfactual simulations show that Airbnb increases total consumer surplus by 924 million euros, affords Airbnb hosts a surplus of 21 million euros, while reducing total hotel profits by 778 million euros, resulting in an overall welfare gain of 167 million euros. Airbnb's value to consumers is highest when demand is high and hotels operate close to capacity constraints. The impact of Airbnb on consumers and hotels is heterogeneous across the city: Hotels in outer districts would gain most from a ban of Airbnb. Conversely, consumer surplus would be reduced the most from a ban of Airbnb in these outer districts.

We study Airbnb hosts' strategic pricing incentives when prices affect ratings. Two channels determine the price-rating interaction: higher prices reduce the value for money, worsening ratings, but increase the taste-based valuation of travelers, improving ratings. The price further determines the frequency of rating updates through its effect on demand. Our empirical results show a dominant value-for-money effect and that hosts lower their prices to surpass rating thresholds. We provide evidence that hosts benefit from low entry prices: offering a median entry discount of seven percent improves medium-run monthly revenues by three percent.

Non-technical summary | Non-academic publication (Italian): lavoce.info | Press coverage (German): Die Presse

Price-transparency mandates are usually motivated by a demand-side logic: When consumers underweight hidden fees, making total prices salient should reduce fee shrouding. We show that, when pricing authority is delegated to heterogeneous sellers, transparency also operates as a supply-side information shock: Price displays inform sellers about their competitors, not only buyers about products. Under fee shrouding, sellers who use hidden add-ons display lower base prices, so an inattentive seller who benchmarks against displayed prices underestimates the true cost of competing listings. Revealing fee-inclusive prices corrects this misperception and can lead such sellers to raise posted prices. Using Airbnb's 2019 introduction of fee-inclusive price displays for EU users, we test this mechanism. Zero-fee listings whose relative affordability improves most when competitors' fees become visible raise base prices by about 17 GBP per night, or 17 percent. The effect is absent in New York City, where the display did not change, concentrated among non-Superhosts, and unaccompanied by any differential increase in bookings for these listings. By contrast, fee-charging hosts more exposed to EU travelers modestly reduce cleaning fees, by 0.50-0.55 GBP, in response to a salience shock affecting only guests searching from within the EU. Therefore, fee transparency in decentralized markets can reduce fees of some products while increasing prices of others.