Uncertainty kills the long tail: demand concentration in peer-to-peer marketplaces

Karl Taeuscher ()
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Karl Taeuscher: Alliance Manchester Business School, University of Manchester

Electronic Markets, 2019, vol. 29, issue 4, No 7, 649-660

Abstract: Abstract Theory on the “Long tail effect” predicts that consumer demand in online markets spreads over a long tail of niche products. Recent research, however, provides opposing evidence and questions the theory’s validity. In this paper, I aim to reconcile these opposing findings by proposing that consumer uncertainty represents a hidden yet important boundary condition for the long tail effect. Under high uncertainty, demand will be much more concentrated as consumers disproportionally choose the most reputable producers and products. I develop these arguments to predict the demand concentration in peer-to-peer marketplaces, a context in which consumers face high uncertainties about their transaction partners. Testing my predictions with a self-collected dataset of 862,755 transactions on a peer-to-peer marketplace for skillsharing supports my hypotheses. I find that a small share of producers disproportionately benefits from marketplace participation. During the observation period, twenty percent of producers generated 94% of sales. These findings suggest that an opposing rich-get-richer effect overrides the long tail effect in peer-to-peer marketplaces and other uncertain environments. I discuss how these findings inform research on peer-to-peer marketplaces and the sharing economy more broadly.

Keywords: Multi-sided platforms; Peer-to-peer marketplaces; Long tail; Demand concentration; Uncertainty (search for similar items in EconPapers)
JEL-codes: D8 M13 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (9)

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DOI: 10.1007/s12525-019-00339-w

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