Pricing on Freelance Platforms: Theory and Experiment

29 Pages Posted: 3 Oct 2024

See all articles by Ying Yang

Ying Yang

affiliation not provided to SSRN

Siyu Wang

Wichita State University

Abstract

Pricing on freelance platforms is challenging as both customers and freelancers are involved in the product co-creation process. Their collaborative efforts influence the product’s quality and price. Using a theoretical framework and an experiment, we show that some users of freelance platforms could benefit from setting the price before co-creation rather than after. Our model predicts that both the freelancer and the customer will invest more effort to create a higher-quality product with early pricing. As a result, the freelancer earns a higher profit, and the customer gains a higher consumer surplus. We conducted experiments to test these hypotheses and found that when early pricing is implemented, freelancers do set higher prices and achieve greater profits. However, contrary to theoretical predictions, neither product quality nor consumer surplus increases when compared to late pricing. The discrepancy between the theory and experimental results arises because myopic freelancers exploit early pricing by charging customers higher prices without investing sufficient effort.

Keywords: pricing, freelance platforms, co-creation, Game Theory, experiments

Suggested Citation

Yang, Ying and Wang, Siyu, Pricing on Freelance Platforms: Theory and Experiment. Available at SSRN: https://ssrn.com/abstract=4975144 or http://dx.doi.org/10.2139/ssrn.4975144

Ying Yang

affiliation not provided to SSRN ( email )

No Address Available

Siyu Wang (Contact Author)

Wichita State University ( email )

United States

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