Consider a busi- ness like Airbnb. Travelers' native demand, without network effects for rooms is given...

 

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Consider a busi- ness like Airbnb. Travelers' native demand, without network effects for rooms is given by qt (pt) = 24,000,000 - 48,000,000p, while property owners' native demand to list rooms is go(po) = 1,200, 00024, 000po. It turns out, however, that for every 2400 travelers who search, another 37 owners are willing to list. Further, for every 2 owners willing to list a room, another 1 guest is willing to search. Once they have joined the platform, the churn rate among travelers is 50% (1 of every 2 doesn't come back next year) while the churn rate among property owners is 12.5% (1 out of every 8 doesn't come back next year). For simplicity, ignore discounting and let marginal costs be 0 for search and listings. part a Independent Pricing Without considering network effects, what are the profit maximizing prices and quantities? part b 2-Sided Network Effects With network effects, what are the profit maximizing prices and quantities? part c LTV: What is the lifetime value of a single traveler? Of a single property owner? part d Bonus Multi-Sided: Suppose we have a multi-sided market on Airbnb that includes advertisers. How would you adjust the full network model, equation 3, on the teaching note? Consider a busi- ness like Airbnb. Travelers' native demand, without network effects for rooms is given by qt (pt) = 24,000,000 - 48,000,000p, while property owners' native demand to list rooms is go(po) = 1,200, 00024, 000po. It turns out, however, that for every 2400 travelers who search, another 37 owners are willing to list. Further, for every 2 owners willing to list a room, another 1 guest is willing to search. Once they have joined the platform, the churn rate among travelers is 50% (1 of every 2 doesn't come back next year) while the churn rate among property owners is 12.5% (1 out of every 8 doesn't come back next year). For simplicity, ignore discounting and let marginal costs be 0 for search and listings. part a Independent Pricing Without considering network effects, what are the profit maximizing prices and quantities? part b 2-Sided Network Effects With network effects, what are the profit maximizing prices and quantities? part c LTV: What is the lifetime value of a single traveler? Of a single property owner? part d Bonus Multi-Sided: Suppose we have a multi-sided market on Airbnb that includes advertisers. How would you adjust the full network model, equation 3, on the teaching note?

Answer rating: 100% (QA)

Part A Independent Pricing Travelers Demand Function 1124000000480000001g1p12400000048000000p1 Owner... View the full answer