Airbnb Smart Pricing algorithm exacerbates racial inequality

Airbnb's 'Smart Pricing' algorithm inadvertently exacerbates racial inequality, according to researchers.

Launched in 2015, the algorithm dynamically adjusts the cost of a night’s stay based on demand and allows hosts to set a minimum price, and had been found to reduce racial disparties.

Prior to its launch, white Airbnb hosts earned significantly more than Black hosts, partly due to properties owned by Black hosts having 20 percent less demand than similar white-owned properties.

However, Carnegie Mellon professor Param Vir Singh and his team of researchers discovered that White hosts appeared to prefer using the algorithm more than Black ones, thereby unintentionally widening existing real-world racial discrepancies. 

The episode highlighted the unintended consequences of algorithms and the importance of considering user adoption when designing such tools.

➕ Research studies also discovered that Airbnb secretly collects and feeds users’ personal data into an algorithm that assess whether they are trustworthy enough to make a booking.

Research, advocacy 🧮

• Carnegie Mellon University (2021). Can an AI Algorithm Mitigate Racial Economic Inequality? Only If More Black Hosts Adopt it.

• Lambert L. (2021). White Airbnb Hosts Earn More. Can AI Shrink the Racial Gap?

News, commentary, analysis 🗞️

• https://www.ft.com/content/5b1471e0-ed4a-47f5-8f3f-0a1ee7f7999c

• https://thegrio.com/2021/05/13/airbnb-racial-disparities-in-pricing/

• https://markets.businessinsider.com/news/stocks/airbnb-pricing-algorithm-led-to-increased-racial-disparities--study-finds-10131658

• https://moguldom.com/352446/study-airbnbs-smart-pricing-algorithm-for-hosts-made-racial-disparities-worse/

• https://markets.businessinsider.com/news/stocks/airbnb-pricing-algorithm-led-to-increased-racial-disparities--study-finds-10131658

• https://www.protocol.com/newsletters/sourcecode/colonial-pipeline-hack

• https://www.morningbrew.com/emerging-tech/stories/2021/05/17/study-airbnb-algorithm-power-help-decrease-racial-disparities-earnings-opposite

• https://www.morningbrew.com/emerging-tech/stories/2021/06/15/airbnb-failed-antidiscrimination-teamand-let-racial-disparities-slip-cracks