Cognitive biases in the sharing economy

Abstract

The Sharing Economy (SE), also known as collaborative consumption, is an unregulated industry, with individuals renting out underused assets to other individuals via a thirdparty platform. Due to the nature of the SE, there is an imbalance of information, servicestandard heterogeneity and risk involved in transacting with strangers. Despite these factors, the SE has disrupted traditional industries, with millions worldwide participating in this economy in one form or another, indicating that there are underlying factors which impact consumption behaviour in this economy. The SE uses online platforms and the ubiquitous nature of internet connectivity to reach global audiences, and similarly so, uses various online signals to convey information to those audiences. Online star rating systems and participant profile pictures are some key examples of digital signals employed in a typical SE business to convey information that would otherwise have been deemed unnecessary or automatically trusted in traditional economy businesses. When considering the short-term accommodation industry in the traditional economy, a 4-star rated hotel is accepted to depict an agreed level of service quality because that rating is assigned by a third-party regulatory board, underpinned by local government policy. Whereas a 4-star service rating score in the SE is based on individual experiences, which is highly subjective. Profile pictures are a core visual element on SE platforms, such as Airbnb, whereas that visual element is completely absent from hotel websites and their online booking systems. One research dimension lacking in current literature, is in consumer psychology, specifically that which is associated with biases in the Sharing Economy. This research focuses on cognitive biases, viz. bandwagon effect and affinity bias. Through an online survey of 165 respondents, various online signals were tested to determine if impacts consumption behaviour in the short-term accommodation SE, using Airbnb as a representative SE. The analysis indicated that affinity bias influenced responses to visual cues. Respondents, who had character traits of having affinity bias, used guest or host profile pictures in their SE participation decision-making