The Empty Promise: When Do P2P Platforms Fail to Serve Advance-Booking Customers?

Abstract

Peer-to-peer (P2P) reservation platforms allow customers to make reservations ahead of time. However, the assets are provided by independent hosts who decide whether and when to list their assets on the platform, after considering the advance-booking and just-in-time markets. A high advance-booking price can incentivize hosts to list early, but may discourage customers from booking in advance, whereas a low price can fail to attract hosts to list early. We study whether a platform can sustain an advance-booking market and identify the conditions under which it instead collapses to a pure just-in-time market. We then examine whether granting hosts control over both prices and listing times mitigates this collapse. Motivated by data from a large car-sharing platform, we develop a two-period game-theoretic model of a P2P platform that sets the prices for both advance-booking and just-in-time customers. Hosts have private costs and face uncertainty about future asset availability when deciding when to list their assets. We show that hosts list early only if the advance price compensates them for their private fulfillment cost, the expected cancellation penalty, and the continuation value of waiting for the just-in-time market. As the just-in-time market becomes more attractive, there is no advance price that can simultaneously attract early supply and advance-booking customers, meaning the platform collapses to a just-in-time market. We show that if hosts face a positive cancellation penalty or advance-booking customers have a lower maximum willingness to pay than just-in-time customers, then the collapse occurs at a finite level of just-in-time demand. Finally, we show that granting hosts pricing autonomy does not mitigate the collapse and, in fact, weakly expands the collapse region under mild conditions.