This happens to any platform using algorithmic pricing. Any time there is an unexpected event that either constrains supply or increases demand (or both), the algos go haywire. Then the the platform has to put in checks to prevent it from happening again.
Remember when Uber was new and the surge pricing could do 20X+ in just a few minutes when there was an emergency? And then they had to fix it so that wouldn't happen, the trade off being that there just weren't cars available.
The thing is, some people aren't price sensitive. In a sudden blizzard, some people are happy to pay $350 for a two mile ride home, just to get home. And some drivers are happy to go out in that weather for their piece of the $350.
The hard question is how do you find the balance?
vouaobrasil · 2h ago
The article doesn't make it clear whether it was AirBNB itself that increased prices, or whether it was hosts. And moreover, it also doesn't even give one example of a before and after price. I'd like to see at least one example.
legitster · 2h ago
Host here. Almost nobody sets prices manually. You either use Airbnb's pricing algorithm, or one from a third party. Either way it's set automatically based on local occupancy rates/hotel prices/etc.
Which is an argument that this is not truly gouging - there's just a demand surge and a supply crunch and the market responds the same way as if it was a business conference in town.
Another thing worth pointing out is that the market of available Airbnbs clears out from the cheaper units first. So it may look like prices are shooting up, but really it's just that all the normal priced ones are gone.
tbrownaw · 1h ago
> Which is an argument that this is not truly gouging - there's just a demand surge and a supply crunch and the market responds the same way as if it was a business conference in town.
So then real price gouging is... what, when you charge more than everyone else (and drive all your customers away to competitors)?
hcnews · 49m ago
> Almost nobody sets prices manually. You either use Airbnb's pricing algorithm, or one from a third party. Either way it's set automatically based on local occupancy rates/hotel prices/etc.
This seems pretty undesirable. Very easy for Airbnb/third party to increase prices even without demand just to increase their prices.
We recently saw a similar price fixing lawsuit for renters. Landlords, co-ordinating together, ended up increasing prices of Condos across major American cities (via means of a third party). The consumer ends up paying unnecessarily high prices in an inelastic market.
xboxnolifes · 1h ago
Sounds less like price gouging and more like price fixing.
pentaphobe · 1h ago
Yeah, funny how property markets always seem to have that same response.
I bet most of those same people would lose their minds if their favourite restaurant tried to double prices overnight. "Yeah we sold a lot of burgers yesterday..."
orangecat · 55m ago
If a restaurant is so popular that they're often running out of food, it's perfectly reasonable for them to raise their prices.
hackable_sand · 6m ago
Not during a famine
AlotOfReading · 59m ago
I wonder how much "value" would actually be lost from the market if prices were simply fixed a month or two ahead of time to exclude those price shocks.
msgodel · 40m ago
>Almost nobody sets prices manually.
Huh. I know a number of AirBNB hosts (the new kind that treat it like a business, not the old kind) and they all absolutely do model the market out months in advance and 100% manually set the prices.
csomar · 2h ago
Is the price reflective of the market though? I just negotiated an airbnb outside of airbnb at 40% of the platform quoted price and it was not a deal either but the market price. Airbnb massively inflates prices for everyone to create an expectation of how much things cost.
dmkolobov · 2h ago
This reminds me of the time my middle-school history teacher decided to bring in one of the student’s financial advisor parents to defend price-gouging on gas during Hurricane Katrina evacuation and subsequent exodus.
It was an unconvincing argument then, and is an unconvincing argument now.
Second most convincing argument is people who hoarded toilet paper during COVID
Arainach · 6m ago
>Second most convincing argument is people who hoarded toilet paper during COVID
That's not an argument for price gouging, it's an argument for rationing.
caterama · 50m ago
Is this a viable workaround… Charge $XX entry/membership fee for the opportunity to buy ice at the regular price?
fsckboy · 1h ago
>The article doesn't make it clear
we don't need to know.
if airbnb raised the prices and the market isn't there, rental income will go down and vacancy rates will go up and airbnb will lower prices again.
if airbnb raised the prices and the market stayed strong, they'd raise the prices more.
the higher the prices go, the more people with extra space to rent out will take notice and clean up their garage, or go stay at grandma's or whatever, creating more housing out of thin air (actually, on the margin) helping alleviate the housing shortage.
the same pattern would happen if hosts raise the prices themselves. also, if all the cheap places get rented, the market will appear to have higher prices even if nothing has changed.
let markets figure out prices, period. that's what markets do, it's one of mankind's stellar achievments. It's why the west is successful and communism fails.
if airbnb has monopoly power and is manipulating prices, fix that problem any day of the week, don't use a massive fire that destroys housing as evidence of anything, it means nothing, that's normal market correction.
JackYoustra · 1h ago
(while I think this isn't the affordability driver) this point about prices isn't really true - compare the graphs of two markets: one with a horizontal demand curve (perfect competition) and one with a downward-sloping demand curve (monopoly) - the first will have no deadweight loss, the second will have substantial deadweight loss.
Markets tend to the second and need state intervention in order to prevent the proliferation of monopolies. Functionally this is intervention every time price coordination happens, which... is pretty clearly what AirBNB is doing!
tsimionescu · 16m ago
This is all economy 101, rational preference BS. The reality is that suppliers very often collude to increase prices universally (particularly for things like housing, where there is almsot a natural monopoly - you can't bring in more land to the same city), and buyers have no way of knowing or acting on this. Airbnb is perfect for organizing such collusion, acting as a virtual cartel.
aurareturn · 22m ago
Is it Airbnb that increased the price or hosts?
Regardless, I don't see any problem here. The price increases, more people with a spare apartment, home, or room will be incentivized to host which increases supply.
If you suppress the price artificially, then the supply won't increase which won't do people who lost their homes any favors.
sanp · 6m ago
Isn’t the underlying assumption here that supply is essentially infinite (or at least comparable to demand)? I think is the underlying assumption with any such statement. If the assumption doesn’t hold true then I am not sure the statement holds true (perhaps only till there is some supply).
MangoToupe · 7m ago
> If you suppress the price artificially, then the supply won't increase which won't do people who lost their homes any favors.
Supply's not increasing substantially in the near future to help regardless. Folks place far too much faith in market effects that history has demonstrated again and again only take effect in the long term.
You know what would actually guarantee an increase in supply? Government-funded public housing. But that would deflate property prices, which is far more reprehensible to americans than the institutions of poverty and homelessness. We are a disgusting and reprehensible people.
rcpt · 55m ago
The fires burned in some of the wealthiest parts of the US. Dumping a ton of multimillionaires on the short term rental market will raise prices yes.
Thank you. This thread is full of people acting as though price gouging during emergencies hasn't been illegal since before the Internet.
Not a California thing either. Southern states have similar laws thanks to common natural disasters like hurricanes.
baron816 · 51m ago
The supply of housing is more elastic than you think. Some people have spare bedrooms, or second homes in LA. They may have previously chosen to leave them vacant, but for many people the higher rates they can get on Airbnb can entice them to list them. This happens at the margins—it’s not an all or nothing thing. So the higher people can earn renting out available space, the more they’ll be willing to rent. At some price point, even a billionaire will rent out their garage.
tropicalfruit · 1h ago
calling the airbnb landlord a "host" and not instead a "parasite" :/
Remember when Uber was new and the surge pricing could do 20X+ in just a few minutes when there was an emergency? And then they had to fix it so that wouldn't happen, the trade off being that there just weren't cars available.
The thing is, some people aren't price sensitive. In a sudden blizzard, some people are happy to pay $350 for a two mile ride home, just to get home. And some drivers are happy to go out in that weather for their piece of the $350.
The hard question is how do you find the balance?
Which is an argument that this is not truly gouging - there's just a demand surge and a supply crunch and the market responds the same way as if it was a business conference in town.
Another thing worth pointing out is that the market of available Airbnbs clears out from the cheaper units first. So it may look like prices are shooting up, but really it's just that all the normal priced ones are gone.
So then real price gouging is... what, when you charge more than everyone else (and drive all your customers away to competitors)?
This seems pretty undesirable. Very easy for Airbnb/third party to increase prices even without demand just to increase their prices.
We recently saw a similar price fixing lawsuit for renters. Landlords, co-ordinating together, ended up increasing prices of Condos across major American cities (via means of a third party). The consumer ends up paying unnecessarily high prices in an inelastic market.
I bet most of those same people would lose their minds if their favourite restaurant tried to double prices overnight. "Yeah we sold a lot of burgers yesterday..."
Huh. I know a number of AirBNB hosts (the new kind that treat it like a business, not the old kind) and they all absolutely do model the market out months in advance and 100% manually set the prices.
It was an unconvincing argument then, and is an unconvincing argument now.
Second most convincing argument is people who hoarded toilet paper during COVID
That's not an argument for price gouging, it's an argument for rationing.
we don't need to know.
if airbnb raised the prices and the market isn't there, rental income will go down and vacancy rates will go up and airbnb will lower prices again.
if airbnb raised the prices and the market stayed strong, they'd raise the prices more.
the higher the prices go, the more people with extra space to rent out will take notice and clean up their garage, or go stay at grandma's or whatever, creating more housing out of thin air (actually, on the margin) helping alleviate the housing shortage.
the same pattern would happen if hosts raise the prices themselves. also, if all the cheap places get rented, the market will appear to have higher prices even if nothing has changed.
let markets figure out prices, period. that's what markets do, it's one of mankind's stellar achievments. It's why the west is successful and communism fails.
if airbnb has monopoly power and is manipulating prices, fix that problem any day of the week, don't use a massive fire that destroys housing as evidence of anything, it means nothing, that's normal market correction.
Markets tend to the second and need state intervention in order to prevent the proliferation of monopolies. Functionally this is intervention every time price coordination happens, which... is pretty clearly what AirBNB is doing!
Regardless, I don't see any problem here. The price increases, more people with a spare apartment, home, or room will be incentivized to host which increases supply.
If you suppress the price artificially, then the supply won't increase which won't do people who lost their homes any favors.
Supply's not increasing substantially in the near future to help regardless. Folks place far too much faith in market effects that history has demonstrated again and again only take effect in the long term.
You know what would actually guarantee an increase in supply? Government-funded public housing. But that would deflate property prices, which is far more reprehensible to americans than the institutions of poverty and homelessness. We are a disgusting and reprehensible people.
But I guess if we accepted that, nobody would be to blame.
Not a California thing either. Southern states have similar laws thanks to common natural disasters like hurricanes.