Trust and Disintermediation: Evidence from an Online Freelance Marketplace

35 Pages Posted: 21 May 2018

See all articles by Grace Gu

Grace Gu

Harvard Business School

Feng Zhu

Harvard University - Harvard Business School

Date Written: May 1, 2018

Abstract

As an intermediary improves trust between two sides of its market to facilitate matching and transactions, it faces an increased risk of disintermediation: with sufficient trust, the two sides may circumvent the intermediary to avoid the intermediary’s fees. We investigate the relationship between increased trust and disintermediation by leveraging a randomized control trial on a major online freelance marketplace. Our results show that enhanced trust increases the chance for high-quality freelancers to be hired. When the trust level is sufficiently high, however, it also increases disintermediation, which offsets the revenue gains from the increase in the hiring of high-quality freelancers. We also identify heterogeneity across clients and freelancers in their tendencies to disintermediate.

Keywords: Disintermediation, Intermediary, Trust, Online Marketplace

JEL Classification: L14, L86, O33

Suggested Citation

Gu, Yuan and Zhu, Feng, Trust and Disintermediation: Evidence from an Online Freelance Marketplace (May 1, 2018). Harvard Business School Technology & Operations Mgt. Unit Working Paper No. 18-103. Available at SSRN: https://ssrn.com/abstract=3182456 or http://dx.doi.org/10.2139/ssrn.3182456

Yuan Gu

Harvard Business School ( email )

Soldiers Field Road
Morgan 270C
Boston, MA 02163
United States

Feng Zhu (Contact Author)

Harvard University - Harvard Business School ( email )

Soldiers Field Road
Morgan 431
Boston, MA 02163
United States

HOME PAGE: http://www.hbs.edu/faculty/Pages/profile.aspx?facId=14938

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