Collaborative Housing and the Intermediation of Moral Hazard

This paper considers intermediation in a differentiated short-term housing market where heterogeneous agents may stay at a hotel or at one of several private hosts´ properties, below or above hotel quality. The collaborative-housing market fails when agents´ hidden actions are noncontractable. If expected liability is not excessive, a trusted intermediary can induce agents to exert first-best effort and fully insure the hosts´ risks, without subsidizing the transactions. The intermediary can also extract the hosts´ surplus if their outside option is zero; somewhat counter intuitively, the commission on either side of the transactions does not affect agents´ equilibrium payoffs. The optimal commission structure makes direct transactions between hosts and renters unattractive.