Steering in Online Markets: The Role of Platform Incentives and Credibility

Moshe A. Barach, Joseph M. Golden and John Horton

No 25917, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Platform marketplaces can potentially steer buyers to certain sellers by recommending or guaranteeing those sellers. Money-back guarantees—which create a direct financial stake for the platform in seller performance—might be particularly effective at steering, as they align buyer and platform interests in creating a good match. We report the results of an experiment in which a platform marketplace—an online labor market—guaranteed select sellers for treated buyers. The presence of a guarantee strongly steered buyers to these guaranteed sellers, but offering guarantees did not increase sales overall, suggesting financial risk was not determinative for the marginal buyer. This preference for guaranteed sellers was not the result of their lower financial risk, but rather because buyers viewed the platform’s decision to guarantee as informative about relative seller quality. Indeed, a follow-up experiment showed that simply recommending the sellers that the platform would have guaranteed was equally effective at steering buyers.

JEL-codes: D02 D22 D47 D82 (search for similar items in EconPapers)
Date: 2019-06
New Economics Papers: this item is included in nep-com, nep-exp and nep-ore
Note: LS PR
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Published as Moshe A. Barach & Joseph M. Golden & John J. Horton, 2020. "Steering in Online Markets: The Role of Platform Incentives and Credibility," Management Science, vol 66(9), pages 4047-4070.

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