Estimating Effects of Incentive Contracts in Online Labor Platforms

Management Science

77 Pages Posted: 6 Aug 2019 Last revised: 22 Jun 2022

See all articles by Nur Kaynar

Nur Kaynar

University of California, Los Angeles (UCLA) - Anderson School of Management

Auyon Siddiq

University of California, Los Angeles (UCLA) - Anderson School of Management

Date Written: August 2, 2019

Abstract

The design of performance-based incentives -- commonly used in online labor platforms -- can be naturally posed as a moral hazard principal-agent problem. In this setting, a key input to the principal's optimal contracting problem is the agent's production function -- the dependence of agent output on effort. While agent production is classically assumed to be known to the principal, this is unlikely to be the case in practice. Motivated by the design of performance-based incentives, we present a method for estimating a principal-agent model from data on incentive contracts and associated outcomes, with a focus on estimating agent production. The proposed estimator is statistically consistent and can be expressed as a mathematical program. To circumvent computational challenges with solving the estimation problem exactly, we approximate it as an integer program, which we solve through a column generation algorithm that uses hypothesis tests to select variables. We show that our approximation scheme and solution technique both preserve the estimator's consistency and combine to dramatically reduce the computational time required to obtain sound estimates. To demonstrate our method, we conducted an experiment on a crowdwork platform (Amazon Mechanical Turk) by randomly assigning incentive contracts with varying pay rates among a pool of workers completing the same task. We present numerical results illustrating how our estimator combined with experimentation can shed light on the efficacy of performance-based incentives.

Keywords: principal-agent model, incentive contracts, estimation, integer programming, online labor platforms

Suggested Citation

Kaynar, Nur and Siddiq, Auyon, Estimating Effects of Incentive Contracts in Online Labor Platforms (August 2, 2019). Management Science, Available at SSRN: https://ssrn.com/abstract=3431383 or http://dx.doi.org/10.2139/ssrn.3431383

Nur Kaynar

University of California, Los Angeles (UCLA) - Anderson School of Management ( email )

110 Westwood Plaza
Los Angeles, CA 90095-1481
United States

Auyon Siddiq (Contact Author)

University of California, Los Angeles (UCLA) - Anderson School of Management ( email )

110 Westwood Plaza
Los Angeles, CA 90095-1481
United States

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