Regulation strictness and supply in the platform economy: the case of Airbnb and Couchsurfing

To what extent is regulation associated with supply in the platform economy (PE)? We address this research question by analyzing the relationship between the strictness of rules/laws in 59 U.S. cities and the number of short-stay accommodation offerings. We find that the stricter regulation is, the higher the supply in these platforms. We also investigate how the presence (or lack thereof) of money transactions in the platform affects this relationship. We discover that the presence of money transactions in these platforms negatively moderates the positive relationship between regulation strictness and the supply of short-stay accommodations. This paper contributes to the literature by investigating how aggregate supply in the PE is affected by legal uncertainties, thereby joining the debate on how digital platforms are reforming labor practices in major parts of the economy and industrial value chains.