The Interplay of Earnings, Ratings, and Penalties on Sharing Platforms: An Empirical Investigation

Yuqian Xu (), Baile Lu (), Anindya Ghose (), Hongyan Dai () and Weihua Zhou ()
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Yuqian Xu: Kenan-Flagler Business School, University of North Carolina at Chapel-Hill, Chapel Hill, North Carolina 27599
Baile Lu: College of Systems Engineering, National University of Defense Technology, Changsha 410073, China
Anindya Ghose: Stern Business School, New York University, New York, New York 10012
Hongyan Dai: Business School, Central University of Finance and Economics, Beijing 100081, China
Weihua Zhou: School of Management, Zhejiang University, Hangzhou 310058, China

Management Science, 2023, vol. 69, issue 10, 6128-6146

Abstract: On-demand delivery through sharing platforms represents a rapidly expanding segment of the global workforce. The emergence of sharing platforms enables gig workers to choose when and where to work, allowing them to do so in a flexible manner. However, such flexibility brings notorious challenges to platforms in managing the gig workforce. Thus, understanding the incentive and behavioral issues of gig workers in this new business model is inherently meaningful. This paper investigates how the incentive mechanisms of sharing platforms—earnings, ratings, and penalties—affect the working decisions of gig workers and their nuanced relationships. To achieve this goal, we use data from one leading on-demand delivery platform with more than 50 million active consumers in China and implement a two-stage Heckman model with instrumental variables to estimate the impact of earnings, ratings, and penalties. We first show that better ratings motivate gig workers to work more. However, interestingly, when ratings are employed together with earnings, the two positive effects of ratings and earnings can be substitutes for each other. Second, we reveal that higher past penalties discourage workers from working more, whereas, interestingly, workers with higher past penalties tend to be more sensitive toward an increase in earnings. Finally, we conduct follow-up surveys to understand the underlying mechanisms of the observed moderating effects from both psychological and economic perspectives. The ultimate goal of this work is to provide managerial implications to help platform managers understand how earnings, ratings, and penalties work together to affect gig workers’ working decisions and how to manage high- and low-quality workers.

Keywords: incentives; behavior; delivery; sharing platform; gig worker; rating; penalty; earning (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:69:y:2023:i:10:p:6128-6146

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