• To assess supply side substitution, one needs to evaluate to what extent a firm that is not yet present in the market but has capabilities to repurpose its production capacity constitutes a competitive constraint to firms operating in the focal
market.
• In practice, the empirical assessment is often difficult because any effects observed upon entry of repurposed capacity are not necessarily caused by said entry alone, but potentially also by the specific market conditions in the focal market (so called
self-selection).
• Policy interventions that affect entry decisions can alleviate such measurement concerns, as we show by assessing how regulations that limit the diffusion of Airbnb in Berlin affect the long-term rentalmarket by repurposing short-term rentals.
• Supply side substitution between professional Airbnb hosts and the long-term rental market exists, but the stock of Airbnb apartments is not large enough to constitute a true competitive constraint.