The Coin of AI Has Two Sides: Matching Enhancement and Information Revelation Effects of AI on Gig-Economy Platforms

51 Pages Posted: 8 Jul 2021

See all articles by Yi Liu

Yi Liu

University of Pennsylvania, The Wharton School

Xinyi Zhao

New York University (NYU) - Leonard N. Stern School of Business

Bowen Lou

University of Connecticut - Operations & Information Management Department

Xinxin Li

University of Connecticut - Department of Operations & Information Management

Date Written: July 1, 2021

Abstract

Artificial intelligence (AI) has been increasingly integrated into the process of matching between workers and employers requesting job tasks on a gig-economy platform. Unlike the conventional wisdom that adopting AI in the matching process always benefits the platform by assigning better-matched jobs (employers) to workers, we discover unintended but possible revenue-decreasing consequences for the AI-adopting platform. We build a stylized game theoretical model that considers gig workers’ strategic participation behavior. We find that while the matching enhancement effect of AI can increase the platform’s revenue by improving matching quality, AI-assigned jobs can also reveal information about the uncertain labor demand to workers and thus unfavorably change workers’ participation decisions, resulting in revenue loss for the platform. We extend our model to the cases where (1) the share of revenue between workers and platform is endogenous and (2) the workers compete for the job tasks, and find consistent results. Furthermore, we examine two approaches to mitigate the potential negative effect of AI-enabled matching for the platform and find that under certain conditions, the AI-adopting platform can be better off by revealing the labor demand or competition information directly to workers. Our results shed light on both the intended positive and unintended negative roles of utilizing AI to facilitate matching, and highlight the importance of thoughtful development, management, and application of AI in the gig economy.

Keywords: economics of artificial intelligence, gig worker, game theory, platform strategy

Suggested Citation

Liu, Yi and Zhao, Xinyi and Lou, Bowen and Li, Xinxin, The Coin of AI Has Two Sides: Matching Enhancement and Information Revelation Effects of AI on Gig-Economy Platforms (July 1, 2021). Available at SSRN: https://ssrn.com/abstract=3877868 or http://dx.doi.org/10.2139/ssrn.3877868

Yi Liu

University of Pennsylvania, The Wharton School ( email )

700 Jon M. Huntsman Hall
3730 Walnut Street
Philadelphia, PA
United States

Xinyi Zhao

New York University (NYU) - Leonard N. Stern School of Business ( email )

44 West 4th Street
Suite 9-160
New York, NY NY 10012
United States

Bowen Lou (Contact Author)

University of Connecticut - Operations & Information Management Department ( email )

Xinxin Li

University of Connecticut - Department of Operations & Information Management ( email )

368 Fairfield Road
Storrs, CT 06269-2041
United States
(860) 486-3062 (Phone)

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