Lock-In Effects in Online Labor Markets

47 Pages Posted: 1 Nov 2021

See all articles by Fabrizio Ciotti

Fabrizio Ciotti

Catholic University of Louvain (UCL) - Center for Operations Research and Econometrics (CORE)

Lars Hornuf

University of Bremen - Faculty of Business Studies and Economics; Max Planck Institute for Innovation and Competition; CESifo (Center for Economic Studies and Ifo Institute)

Eliza Stenzhorn

University of Bremen - Faculty of Business Studies and Economics

Date Written: 2021

Abstract

This article reports on an investigation of the role of lock-in exploitation and the impact of reputation portability on workers’ switching behaviors in online labor markets. Online platforms using reputation mechanisms typically prevent users from transferring their ratings to other platforms, inducing lock-in effects and high switching costs and leaving users vulnerable to platform exploitation. With a theoretical model, in which workers in online labor markets are locked-in by their reputational data, we test the effects using an online lab-in-the-field decision experiment. In addition to comparing a policy regime with and without reputation portability, we vary lock-in exploitation using platform fees to consider how switching behavior might differ according to monetary motives and fairness preferences. Theoretically, this study reveals how reputational investments can produce switching costs that platforms can exploit. Experimentally, the results suggest that reputation portability mitigates lock-in effects, making users less susceptible to lock-in exploitation. The data further show that switching is driven primarily by monetary motives, but perceiving the fee as unfair also has a significant role.

Keywords: crowdsourcing, online markets, online labor, reputation portability, switching costs

JEL Classification: J240, D910, L510

Suggested Citation

Ciotti, Fabrizio and Hornuf, Lars and Stenzhorn, Eliza, Lock-In Effects in Online Labor Markets (2021). CESifo Working Paper No. 9379, Available at SSRN: https://ssrn.com/abstract=3953015 or http://dx.doi.org/10.2139/ssrn.3953015

Fabrizio Ciotti

Catholic University of Louvain (UCL) - Center for Operations Research and Econometrics (CORE) ( email )

34 Voie du Roman Pays
B-1348 Louvain-la-Neuve, b-1348
Belgium

Lars Hornuf

University of Bremen - Faculty of Business Studies and Economics ( email )

Bremen, D-28359
Germany
+49 89 20348619 (Phone)

HOME PAGE: http://www.hornuf.com

Max Planck Institute for Innovation and Competition ( email )

Marstallplatz 1
Munich, Bayern 80539
Germany

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

Eliza Stenzhorn (Contact Author)

University of Bremen - Faculty of Business Studies and Economics ( email )

Bremen, D-28359
Germany

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