Customer Voice on Two-Sided Platforms: The Effect of Surge Pricing on Customer Complaints

Abstract

Two-sided platforms (e.g., ridesharing, freelance labor, lodging) match customers and service providers. Customers can voice their satisfaction level through review/rating systems, which the platforms use to monitor and screen service providers. However, customers may mis-direct complaints about platform-level features towards individual service providers. We examine the extent and consequences of this issue in the context of a large ridesharing platform. We focus on surge pricing as the platform-level feature. Our findings are as follows. First, for an average trip, surge pricing makes it 1.13 times more likely for the driver to receive a complaint (either a low rating or a formal complaint). Second, complaints negatively impact driver's future income. Surge-induced complaints offset about 23% of a driver's immediate gain from the surged fare. Third, after the platform adopted a policy to cap the magnitude of surge prices, the effect of surge on customer complaints reduced. The policy also led to more usage of the platform. The results suggest a close interaction between the pricing and review systems on ridesharing platforms. More broadly, they point to the importance for online two-sided platforms to identify and address customer complaints about platform-level features that may have been mis-directed to service providers.

Keywords: customer complaints, review system, ridesharing, driver income, surge pricing, two-sided platforms