Impact of Regulations on Sharing Economy

Sharing economy platforms like Uber and Airbnb are being subjected to regulations by governing bodies to safeguard the interests of their local communities. While existing research suggests that such regulations are detrimental for the sharing phenomenon, platforms like Uber and Airbnb have continued to grow and thrive. Theorizing on the basis of signaling theory and uncertainty reduction theory we argue that regulations can be beneficial for sharing services. Treating the case of the city of New Orleans that implemented regulations for licensing Airbnb listings in April of 2017 as a natural experiment, we conducted a difference-in-differences analysis at a micro level using balanced panel data sets and a suitable control group. Our findings show regulations had a positive effect and it led to an increase in the performance of the service providers by 23%. Our study provides empirical evidence in support of regulations for the sharing economy