Should Governments Regulate Peer-to-Peer Markets?

Dinner at home

Enrique Dans writes about the phenomenon of apps to eat out at private houses{:target=“blank”}1. These apps aim to do for eating out what Airbnb did for travel accommodation and Uber for taxis. Or, if you want a less used example, what companies like LendingClub are doing for lending.

Not everyone is happy with these apps. For example, an article in BBC News says that “restaurant owners in Paris are furious with chefs who have started catering for diners in their own homes –traditional eateries say they could be put out of business as websites put customers directly in touch with cooks”:

In Paris, the restaurateurs’ union Synhorcat has appealed to the French government to crack down on “underground restaurants”, arguing that bistros and brasseries operating on very thin margins risk being put out of business.

Synhorcat estimates there are 3,000 home-chefs in France. It has two arguments against them: first, that home-restaurants are part of the black economy; and second, that hygiene and safety rules are being flouted.

“In the space of three years Airbnb has tripled its presence in Paris –to the point that there are now 50,000 flats advertised on its website,” –says Synhorcat’s president Didier Chenet– He says small and medium-sized hotels have been hit hard [by AirBnB] and over the summer they had to drop their prices. “If the government doesn’t do something to stop the underground restaurants, it will be the same disaster.”

The thing is, private chefs for hire or chefs that offer dinners at their places have always existed. And the internet is specially good at lowering barriers of entrance, and in making dormant supply surface and matching it with demand. It was just a matter of time for this to happen. For example, should gyms ask the government to do something if someone launches an app to match personal trainers with potential customers?

Just as the media industry tried to ban digital content and failed miserably, or phone companies tried to block Voice-IP calls in its beginnings instead of embracing change, I think the trend of peer-to-peer marketplaces emerging is here to stay, and will force the incumbents to rethink their businesses.

As of regulations per se, as some researchers suggest2 that it would be wise to take a relatively lenient early-stage approach to regulation. Peer-to-peer markets have a dynamic nature, specially if they grow very fast. Regulations, on the other hand, cannot be easily changed or withdrawn, so rules that look sensible at the time they are imposed may appear outdated or misguided.

  1. Some apps mentioned include EatAbout (“Enjoy private meals in the home of a chef”), Deliveroo (“Get amazing food from an incredible selection of local restaurants delivered in an average of just 32 minutes”), EatWith (“Join us at a communal table”, “Bringing chefs and foodies together one meal at a time”), ChefExchange (“Find private chefs to cook for you, at home”), and VizEat (“The world invites you to dinner”). 

  2. cfr Lira EINAV, Chiara FARRONATO, Jonathan LEVIN. Peer-to-Peer Markets. Working Paper 21496

airbnb peer-to-peer regulation uber

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