4 ms·

Why doesn't supply and demand work to set the prices properly in this case?

by ta8645 3y ago

dragonwriter 3y ago
The problem isn’t that supply and demand doesn’t set prices properly (there may be market issues in this market, but that's not the complaint), the problem is that AirBnB doesn’t benefit from prices being set properly.
- dotcoma 3y ago
  Or benefits more from prices being very low.
  - toomuchtodo 3y ago
    Indeed, Airbnb wants to maximize for booking volume and platform fees over hosts maximizing for revenue. Airbnb rode the covid travel/remote wave (even Chesky was astonished at their valuation at IPO [1], ~$100B), and with the global economy slowing and travelers starting to prefer hotels, they’re going to struggle to hold onto the revenue levels they might’ve (perhaps a bit unrealistically) become accustomed to. Is it a $100B business at 5% interest rates and slower travel going forward? ¯\_(ツ)_/¯ [1] https://archive.ph/2020.12.13-031305/https://www.nytimes.com/2020/12/11/business/dealbook/airbnb-ipo-chesky.html https://archive.ph/2020.12.13-031305/https://www.nytimes.com...
    - ehnto 3y ago
      AirBnB is too much hassle and risk. Sometimes it's seamless, sometimes it feels like you're being hosted by a landlord who's expecting to make their problems your problems and charge you for the privilege.
- chongli 3y ago
  Then why doesn’t AirBnB change their fee structure to benefit from prices being set properly?
  - voisin 3y ago
    Woah woah woah, let’s not get hasty here. Shareholders gotta get value after all.
  - darth_avocado 3y ago
    Insert “we don’t do that here” meme
mianos 3y ago
They do, supply and demand play a crucial role in influencing price transparency. Now demand exceeds supply, hosts have less incentive to provide transparent pricing since their listings are more likely to be quickly booked due to the scarcity of available properties. But, it's only when there's an oversupply of listings that competition among hosts intensifies, prompting them to adopt transparent pricing as a competitive advantage to attract potential guests.
- ta8645 3y ago
  That sounds like things are working as they should. Prices for scarce resources should naturally go up, and down if there is lots of competition. If someone is charging too much, they won't sell as much as someone who sets a reasonable price. If hotels are cheaper, then hotels will outperform Airbnb. I still don't see why you need to ask anyone to lower their prices. The market will force them to lower their prices... or it won't if the price is set properly. Unless I'm missing something that prevents the market from doing what markets do. Which was why I asked the question.
  - mianos 3y ago
    Brian Chesky is not saying to lower their prices. He is asking for property suppliers to check the local prices. Business Insider is pretty much the daily-mail of faux business publications. For markets to operate efficiently and quickly adjust prices based on supply and demand, you need transparent pricing. He is suggesting people actually compare local prices when setting their own. What is not working, is people are not comparing all prices or they are not available. When they do, they won't rent at Air BnB. This will be his loss, when hotels claw back patronage from bullshitting Air BnBs.
    - ta8645 3y ago
      > What is not working, is people are not comparing all prices or they are not available. You're not hearing the argument. It's not my argument. It's the way markets are meant to operate. You don't need to ask anyone to check local prices. If people have something they want to sell, they will sell it at the proper price. If they set the wrong price, it will not sell. So, in this case, they will get instant feedback that they've done something wrong, because their rental units, will not be rented. They will make no money from them. They will be compelled to lower their prices if they want to rent them. You don't need to ask them to do anything, they will discover for themselves, the market will force them to realize their mistake. What i'm asking is why is the market insufficient in this case? Why is it not working? But your argument is making me think it works fine, it's just not producing the results that some people would rather see.

Why doesn't supply and demand work to set the prices properly in this case?

by ta8645 3y ago

Why doesn't supply and demand work to set the prices properly in this case?

The problem isn’t that supply and demand doesn’t set prices properly (there may be market issues in this market, but that's not the complaint), the problem is that AirBnB doesn’t benefit from prices being set properly.

dotcoma 3y ago
Or benefits more from prices being very low.
- toomuchtodo 3y ago
  Indeed, Airbnb wants to maximize for booking volume and platform fees over hosts maximizing for revenue. Airbnb rode the covid travel/remote wave (even Chesky was astonished at their valuation at IPO [1], ~$100B), and with the global economy slowing and travelers starting to prefer hotels, they’re going to struggle to hold onto the revenue levels they might’ve (perhaps a bit unrealistically) become accustomed to. Is it a $100B business at 5% interest rates and slower travel going forward? ¯\_(ツ)_/¯ [1] https://archive.ph/2020.12.13-031305/https://www.nytimes.com/2020/12/11/business/dealbook/airbnb-ipo-chesky.html https://archive.ph/2020.12.13-031305/https://www.nytimes.com...
  - ehnto 3y ago
    AirBnB is too much hassle and risk. Sometimes it's seamless, sometimes it feels like you're being hosted by a landlord who's expecting to make their problems your problems and charge you for the privilege.
chongli 3y ago
Then why doesn’t AirBnB change their fee structure to benefit from prices being set properly?
- voisin 3y ago
  Woah woah woah, let’s not get hasty here. Shareholders gotta get value after all.
- darth_avocado 3y ago
  Insert “we don’t do that here” meme

mianos 3y ago

They do, supply and demand play a crucial role in influencing price transparency. Now demand exceeds supply, hosts have less incentive to provide transparent pricing since their listings are more likely to be quickly booked due to the scarcity of available properties. But, it's only when there's an oversupply of listings that competition among hosts intensifies, prompting them to adopt transparent pricing as a competitive advantage to attract potential guests.

ta8645 3y ago
That sounds like things are working as they should. Prices for scarce resources should naturally go up, and down if there is lots of competition. If someone is charging too much, they won't sell as much as someone who sets a reasonable price. If hotels are cheaper, then hotels will outperform Airbnb. I still don't see why you need to ask anyone to lower their prices. The market will force them to lower their prices... or it won't if the price is set properly. Unless I'm missing something that prevents the market from doing what markets do. Which was why I asked the question.
- mianos 3y ago
  Brian Chesky is not saying to lower their prices. He is asking for property suppliers to check the local prices. Business Insider is pretty much the daily-mail of faux business publications. For markets to operate efficiently and quickly adjust prices based on supply and demand, you need transparent pricing. He is suggesting people actually compare local prices when setting their own. What is not working, is people are not comparing all prices or they are not available. When they do, they won't rent at Air BnB. This will be his loss, when hotels claw back patronage from bullshitting Air BnBs.
  - ta8645 3y ago
    > What is not working, is people are not comparing all prices or they are not available. You're not hearing the argument. It's not my argument. It's the way markets are meant to operate. You don't need to ask anyone to check local prices. If people have something they want to sell, they will sell it at the proper price. If they set the wrong price, it will not sell. So, in this case, they will get instant feedback that they've done something wrong, because their rental units, will not be rented. They will make no money from them. They will be compelled to lower their prices if they want to rent them. You don't need to ask them to do anything, they will discover for themselves, the market will force them to realize their mistake. What i'm asking is why is the market insufficient in this case? Why is it not working? But your argument is making me think it works fine, it's just not producing the results that some people would rather see.