Yanhua Bird – Organizational Behavior, Harvard University

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Strategic Downward Selection: Evidence from a Peer-to-peer Platform Market

Abstract: This study provides a novel theoretical account to explain why, in some exchanges, transaction partners with inferior market standing are more sought after despite having fewer resources and being less prominent, contrary to the general view in the literature. I propose that in markets in which one’s success depends almost entirely on counterparties’ evaluations—a rarely considered situation in the literature of exchange partner selection— market participants exercise strategic downward selection driven by evaluation anxiety.  I test my theory using both quantitative and qualitative data on a peer-to-peer lodging platform market.