ABSTRACT
This paper describes the pricing strategy model deployed at Airbnb, an online marketplace for sharing home and experience. The goal of price optimization is to help hosts who share their homes on Airbnb set the optimal price for their listings. In contrast to conventional pricing problems, where pricing strategies are applied to a large quantity of identical products, there are no "identical" products on Airbnb, because each listing on our platform offers unique values and experiences to our guests. The unique nature of Airbnb listings makes it very difficult to estimate an accurate demand curve that's required to apply conventional revenue maximization pricing strategies.
Our pricing system consists of three components. First, a binary classification model predicts the booking probability of each listing-night. Second, a regression model predicts the optimal price for each listing-night, in which a customized loss function is used to guide the learning. Finally, we apply additional personalization logic on top of the output from the second model to generate the final price suggestions. In this paper, we focus on describing the regression model in the second stage of our pricing system. We also describe a novel set of metrics for offline evaluation. The proposed pricing strategy has been deployed in production to power the Price Tips and Smart Pricing tool on Airbnb. Online A/B testing results demonstrate the effectiveness of the proposed strategy model.
Supplemental Material
- Yasin Abbasi-Yadkori, Dávid Pál, and Csaba Szepesvári. 2011. Improved Algorithms for Linear Stochastic Bandits. In Proceedings of the 24th International Conference on Neural Information Processing Systems (NIPS'11). Curran Associates Inc., USA, 2312--2320. Google ScholarDigital Library
- Patrick Bajari, Denis Nekipelov, Stephen P. Ryan, and Miaoyu Yang. 2015. Demand estimation with machine learning and model combination. National Bureau of Economic Research (2015).Google ScholarCross Ref
- Tianqi Chen and Carlos Guestrin. 2016. XGBoost: A Scalable Tree Boosting System. In Proceedings of the 22nd ACM SIGKDD International Conference on Knowledge Discovery and Data Mining (KDD '16). ACM, New York, NY, USA, 785--794. Google ScholarDigital Library
- Wei Chu, Lihong Li, Lev Reyzin, and Robert Schapire. 2011. Contextual Bandits with Linear Payoff Functions. In Proceedings of the Fourteenth International Conference on Artificial Intelligence and Statistics (Proceedings of Machine Learning Research), Geoffrey Gordon, David Dunson, and Miroslav Dudák (Eds.), Vol. 15. PMLR, Fort Lauderdale, FL, USA, 208--214.Google Scholar
- Maxime Cohen, Ilan Lobel, and Renato Paes Leme. 2016. Feature-based Dynamic Pricing. In Proceedings of the 2016 ACM Conference on Economics and Computation. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2737045 Google ScholarDigital Library
- Arnoud V. den Boer. 2015. Dynamic pricing and learning: Historical origins, current research, and new directions. Surveys in Operations Research and Management Science 20, 1 (2015), 1--18.Google Scholar
- Jerome H. Friedman. 2001. Greedy function approximation: A gradient boosting machine. Ann. Statist. 29, 5 (10 2001), 1189--1232.Google Scholar
- hihua Zhang, Rachel J. C. Chen, Lee D. Han, and Lu Yang. 2017. Defining the price of hospitality: networked hospitality exchange via Airbnb. sustainability 9, 1635 (2017).Google Scholar
- A. Ikkala, T. Lampinen. 2014. Defining the price of hospitality: networked hospitality exchange via Airbnb. In Proceedings of the Companion Publication of the 17th ACM Conference on Computer Supported Cooperative Work and Social Computing, (Proceedings of Machine Learning Research). Baltimore, MD, USA, 73--176. Google ScholarDigital Library
- Bottou, L. 2010. Large-Scale Machine Learning with Stochastic Gradient Descent. In COMPSTAT. 122--186.Google Scholar
- Q. Yang, T. Guo, L. Li, Y. Pan. 2016. Reasonable price recommendation on Airbnb using Multi-Scale clustering. In Proceedings of the 2016 35th Control Conference (CCC). Chengdu, China, 7038--7041.Google Scholar
- Neal Parikh and Stephen Boyd. 2014. Proximal Algorithms. Foundations and Trends in Optimization archive (2014). Google ScholarDigital Library
- Giovanni Quattrone, Davide Proserpio, Daniele Quercia, Licia Capra, and Mirco Musolesi. 2016. Who Benefits from the "Sharing" Economy of Airbnb? (WWW '16). Google ScholarDigital Library
- Alex J. Smola and Bernhard Schölkopf. 2004. A tutorial on support vector regression. Statistics and Computing 14, 1 (2004), 199--222. Google ScholarDigital Library
- H. Varian. 2014. Big data: New tricks for econometrics. Journal of Economic Perspectives 28, 2 (2014), 3--28.Google ScholarCross Ref
- J. L. Wang, D. Nicolau. 2017. Price determinants of sharing economy based accommodation rental: A study oflistings from 33 cities on Airbnb.com. Int. J. Hosp. Manag. 62 (2017), 120--131.Google ScholarCross Ref
- Matei Zaharia, Reynold S. Xin, Patrick Wendell, Tathagata Das, Michael Armbrust, Ankur Dave, Xiangrui Meng, Josh Rosen, Shivaram Venkataraman, Michael J. Franklin, Ali Ghodsi, Joseph Gonzalez, Scott Shenker, and Ion Stoica. 2016. Apache Spark: A Unified Engine for Big Data Processing. Commun. ACM 59, 11 (Oct. 2016), 56--65. Google ScholarDigital Library
- Georgios Zervas, Davide Proserpio, and John W. Byers. 2017. The Rise of the Sharing Economy: Estimating the Impact of Airbnb on the Hotel Industry. Journal of Marketing Research 54, 5 (2017), 687--705.Google ScholarCross Ref
Index Terms
- Customized Regression Model for Airbnb Dynamic Pricing
Recommendations
Dynamic pricing with limited supply
EC '12: Proceedings of the 13th ACM Conference on Electronic CommerceWe consider the problem of designing revenue maximizing online posted-price mechanisms when the seller has limited supply. A seller has k identical items for sale and is facing n potential buyers ("agents") that are arriving sequentially. Each agent is ...
Multidimensional Dynamic Pricing for Welfare Maximization
EC '17: Proceedings of the 2017 ACM Conference on Economics and ComputationWe study the problem of a seller dynamically pricing d distinct types of indivisible goods, when faced with the online arrival of unit-demand buyers drawn independently from an unknown distribution. The goods are not in limited supply, but can only be ...
Dynamic and Nonuniform Pricing Strategies for Revenue Maximization
† Special Section on the Fiftieth Annual IEEE Symposium on Foundations of Computer Science (FOCS 2009)We consider the item pricing problem for revenue maximization, where a single seller with multiple distinct items caters to multiple buyers with unknown subadditive valuation functions who arrive in a sequence. The seller sets the prices on individual items, ...
Comments