IDEAS home Printed from https://ideas.repec.org/p/hka/wpaper/2018-066.html
   My bibliography  Save this paper

Can reputation discipline the gig economy? Experimental evidence from an online labor market

Author

Listed:
  • Alan Benson

    () (University of Minnesota, Carlton School of Management)

  • Aaron Sojourner

    () (University of Minnesota)

  • Akhmed Umyarov

    () (University of Minnesota)

Abstract

Just as there are good and bad workers, there are also good and bad employers that will opportunistically depart from expectations, norms, or laws. However, prior research in economics and information sciences has focused sharply on the employer’s problem of identifying good workers and service providers rather than vice versa. This issue is especially pronounced in markets for gig work, including online labor markets, where platforms are developing strategies to help workers identify good employers. We build a theoretical model for the value of such reputation systems and test its predictions in on Amazon Mechanical Turk, where employers may decline to pay workers while keeping their work product and workers protect themselves using third-party reputation systems (such as Turkopticon). We find that: (1) in an experiment on worker arrival, a good reputation allows employers to operate on a larger scale and at a faster speed, higher quality, or lower cost; (2) in an experimental audit of employers, working for good-reputation employers pays 40 percent higher effective wages due to faster completion times and lower likelihoods of rejection; and (3) exploiting reputation system crashes, the reputation system is particularly important to small, good-reputation employers, which rely on the reputation system to compete for workers against more established employers. This is the first clean field evidence of the effects of employer reputation in any labor market and is suggestive of the special role that reputation-diffusing technologies can play in promoting gig work, where conventional labor and contract laws are weak.

Suggested Citation

  • Alan Benson & Aaron Sojourner & Akhmed Umyarov, 2018. "Can reputation discipline the gig economy? Experimental evidence from an online labor market," Working Papers 2018-066, Human Capital and Economic Opportunity Working Group.
  • Handle: RePEc:hka:wpaper:2018-066
    Note: MIP
    as

    Download full text from publisher

    File URL: http://humcap.uchicago.edu/RePEc/hka/wpaper/Benson_Sojourner_Umyarov_2018_reputation-gig-economy.pdf
    File Function: First version, July 3, 2018
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Björn Bartling & Ernst Fehr & Klaus M. Schmidt, 2012. "Use and abuse of authority: A behavioral foundation of the employment relation," ECON - Working Papers 098, Department of Economics - University of Zurich.
    2. Manning, Alan, 2011. "Imperfect Competition in the Labor Market," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 4, chapter 11, pages 973-1041, Elsevier.
    3. Ritter, Joseph A & Taylor, Lowell J, 1994. "Workers as Creditors: Performance Bonds and Efficiency Wages," American Economic Review, American Economic Association, vol. 84(3), pages 694-704, June.
    4. John A. List & Fatemeh Momeni, 2017. "When Corporate Social Responsibility Backfires: Theory and Evidence from a Natural Field Experiment," NBER Working Papers 24169, National Bureau of Economic Research, Inc.
    5. Martin Brown & Armin Falk & Ernst Fehr, 2004. "Relational Contracts and the Nature of Market Interactions," Econometrica, Econometric Society, vol. 72(3), pages 747-780, May.
    6. Uday M. Apte & Richard O. Mason, 1995. "Global Disaggregation of Information-Intensive Services," Management Science, INFORMS, vol. 41(7), pages 1250-1262, July.
    7. Björn Bartling & Ernst Fehr & Klaus M. Schmidt, 2013. "JEEA-FBBVA Lecture 2012: USE AND ABUSE OF AUTHORITY: A BEHAVIORAL FOUNDATION OF THE EMPLOYMENT RELATION," Journal of the European Economic Association, European Economic Association, vol. 11(4), pages 711-742, August.
    8. John Horton, 2018. "Buyer Uncertainty about Seller Capacity: Causes, Consequences, and a Partial Solution," CESifo Working Paper Series 6985, CESifo Group Munich.
    9. Ajay Agrawal & John Horton & Nicola Lacetera & Elizabeth Lyons, 2015. "Digitization and the Contract Labor Market: A Research Agenda," NBER Chapters, in: Economic Analysis of the Digital Economy, pages 219-250, National Bureau of Economic Research, Inc.
    10. Michael Luca, 2011. "Reviews, Reputation, and Revenue: The Case of Yelp.com," Harvard Business School Working Papers 12-016, Harvard Business School, revised Mar 2016.
    11. William M. Rodgers III & Sara Horowitz & Gabrielle Wuolo, 2014. "The Impact of Client Nonpayment on the Income of Contingent Workers: Evidence from the Freelancers Union Independent Worker Survey," ILR Review, Cornell University, ILR School, vol. 67(3_suppl), pages 702-733, May.
    12. Arindrajit Dube & Jeff Jacobs & Suresh Naidu & Siddharth Suri, 2018. "Monopsony in Online Labor Markets," NBER Working Papers 24416, National Bureau of Economic Research, Inc.
    13. Ioana Marinescu & Nadav Klein & Andrew Chamberlain & Morgan Smart, 2018. "Incentives Can Reduce Bias in Online Reviews," Working Papers id:12575, eSocialSciences.
    14. Bajari, Patrick & Hortacsu, Ali, 2003. " The Winner's Curse, Reserve Prices, and Endogenous Entry: Empirical Insights from eBay Auctions," RAND Journal of Economics, The RAND Corporation, vol. 34(2), pages 329-355, Summer.
    15. Carmichael, H Lorne, 1984. "Reputations in the Labor Market," American Economic Review, American Economic Association, vol. 74(4), pages 713-725, September.
    16. Xiang Hui & Maryam Saeedi & Zeqian Shen & Neel Sundaresan, 2016. "Reputation and Regulations: Evidence from eBay," Management Science, INFORMS, vol. 62(12), pages 3604-3616, December.
    17. Jeremy Edwards & Sheilagh Ogilvie, 2012. "Contract enforcement, institutions, and social capital: the Maghribi traders reappraised," Economic History Review, Economic History Society, vol. 65(2), pages 421-444, May.
    18. Alan B. Krueger, 2017. "Independent Workers: What Role for Public Policy," Working Papers 615, Princeton University, Department of Economics, Industrial Relations Section..
    19. Antonio Moreno & Christian Terwiesch, 2014. "Doing Business with Strangers: Reputation in Online Service Marketplaces," Information Systems Research, INFORMS, vol. 25(4), pages 865-886, December.
    20. Klein, Benjamin & Leffler, Keith B, 1981. "The Role of Market Forces in Assuring Contractual Performance," Journal of Political Economy, University of Chicago Press, vol. 89(4), pages 615-641, August.
    21. Chris Nosko & Steven Tadelis, 2015. "The Limits of Reputation in Platform Markets: An Empirical Analysis and Field Experiment," NBER Working Papers 20830, National Bureau of Economic Research, Inc.
    22. Apostolos Filippas & John J. Horton & Joseph M. Golden, 2019. "Reputation Inflation," NBER Working Papers 25857, National Bureau of Economic Research, Inc.
    23. Bartling, Björn & Fehr, Ernst & Schmidt, Klaus M., 2012. "Use and Abuse of Authority: A Behavioral Foundation of the Employment Relation," CEPR Discussion Papers 9231, C.E.P.R. Discussion Papers.
    24. Abhijit V. Banerjee & Esther Duflo, 2000. "Reputation Effects and the Limits of Contracting: A Study of the Indian Software Industry," The Quarterly Journal of Economics, Oxford University Press, vol. 115(3), pages 989-1017.
    25. Simon Board & Moritz Meyer‐ter‐Vehn, 2013. "Reputation for Quality," Econometrica, Econometric Society, vol. 81(6), pages 2381-2462, November.
    26. Ajay K. Agrawal & Nicola Lacetera & Elizabeth Lyons, 2013. "Does Information Help or Hinder Job Applicants from Less Developed Countries in Online Markets?," NBER Working Papers 18720, National Bureau of Economic Research, Inc.
    27. Ryan C. McDevitt, 2011. "Names and Reputations: An Empirical Analysis," American Economic Journal: Microeconomics, American Economic Association, vol. 3(3), pages 193-209, August.
    28. Cornes, Richard & Sandler, Todd, 1994. "The comparative static properties of the impure public good model," Journal of Public Economics, Elsevier, vol. 54(3), pages 403-421, July.
    29. Holmstrom, Bengt, 1981. "Contractual Models of the Labor Market," American Economic Review, American Economic Association, vol. 71(2), pages 308-313, May.
    30. repec:hoo:wpaper:e-90-3 is not listed on IDEAS
    31. Annette Bernhardt & Michael W. Spiller & Nik Theodore, 2013. "Employers Gone Rogue: Explaining Industry Variation in Violations of Workplace Laws," ILR Review, Cornell University, ILR School, vol. 66(4), pages 808-832, July.
    32. Clive Bull, 1987. "The Existence of Self-Enforcing Implicit Contracts," The Quarterly Journal of Economics, Oxford University Press, vol. 102(1), pages 147-159.
    33. Chrysanthos Dellarocas & Charles A. Wood, 2008. "The Sound of Silence in Online Feedback: Estimating Trading Risks in the Presence of Reporting Bias," Management Science, INFORMS, vol. 54(3), pages 460-476, March.
    34. W. Bentley MacLeod, 2007. "Can Contract Theory Explain Social Preferences?," American Economic Review, American Economic Association, vol. 97(2), pages 187-192, May.
    35. Amanda Pallais, 2014. "Inefficient Hiring in Entry-Level Labor Markets," American Economic Review, American Economic Association, vol. 104(11), pages 3565-3599, November.
    36. Chiara Farronato & Andrey Fradkin & Bradley Larsen & Erik Brynjolfsson, 2020. "Consumer Protection in an Online World: An Analysis of Occupational Licensing," NBER Working Papers 26601, National Bureau of Economic Research, Inc.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Filippo Belloc, 2019. "Why Isn't Uber Worker-Managed? A Model of Digital Platform Cooperatives," CESifo Working Paper Series 7708, CESifo Group Munich.
    2. Ioana Marinescu & Nadav Klein & Andrew Chamberlain & Morgan Smart, 2018. "Incentives Can Reduce Bias in Online Reviews," NBER Working Papers 24372, National Bureau of Economic Research, Inc.

    More about this item

    Keywords

    labor; job search; screening; contracts; Reputation; online ratings; personnel; online labor markets;

    JEL classification:

    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • M55 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Labor Contracting Devices
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • K12 - Law and Economics - - Basic Areas of Law - - - Contract Law
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hka:wpaper:2018-066. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jennifer Pachon). General contact details of provider: http://edirc.repec.org/data/mfichus.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.