Steering in Online Markets: The Role of Platform Incentives and Credibility

56 Pages Posted: 11 Jun 2019

See all articles by Moshe Barach

Moshe Barach

University of Minnesota - Twin Cities - Carlson School of Management

Joseph Golden

Collage.com

John J. Horton

New York University (NYU) - Department of Information, Operations, and Management Sciences

Date Written: June 2019

Abstract

Platform marketplaces can potentially steer buyers to certain sellers by recommending or guaranteeing those sellers. Money-back guarantees—which create a direct financial stake for the platform in seller performance—might be particularly effective at steering, as they align buyer and platform interests in creating a good match. We report the results of an experiment in which a platform marketplace—an online labor market—guaranteed select sellers for treated buyers. The presence of a guarantee strongly steered buyers to these guaranteed sellers, but offering guarantees did not increase sales overall, suggesting financial risk was not determinative for the marginal buyer. This preference for guaranteed sellers was not the result of their lower financial risk, but rather because buyers viewed the platform’s decision to guarantee as informative about relative seller quality. Indeed, a follow-up experiment showed that simply recommending the sellers that the platform would have guaranteed was equally effective at steering buyers.

Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.

Suggested Citation

Barach, Moshe and Golden, Joseph and Horton, John J., Steering in Online Markets: The Role of Platform Incentives and Credibility (June 2019). NBER Working Paper No. w25917, Available at SSRN: https://ssrn.com/abstract=3401623

Moshe Barach (Contact Author)

University of Minnesota - Twin Cities - Carlson School of Management ( email )

19th Avenue South
Minneapolis, MN 55455
United States

Joseph Golden

Collage.com ( email )

John J. Horton

New York University (NYU) - Department of Information, Operations, and Management Sciences ( email )

44 West Fourth Street
New York, NY 10012
United States
6175952437 (Phone)

HOME PAGE: http://john-joseph-horton.com

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
4
Abstract Views
157
PlumX Metrics