Competition for Prominence, with Leonardo Madio
Job Market Paper - [Working Paper]
Online intermediaries have the ability to steer buyers purchasing decisions by giving a more prominent position to one retailer. In this paper, we study the incentive of an online intermediary to assign a default position to either a low- or high-quality retailer. For a given fee, the intermediary finds it optimal to assign a default position to the high-quality (respectively, low-quality) retailer if the share of consumers that are susceptible to the intermediary's recommendation is large (resp. small) enough. If the intermediary freely chooses its commission fee, retailers fiercely compete for prominence, which is awarded to the high-quality retailer. We then compare this competition for prominence scheme with a pay-for-prominence auction and show that while the former is always profitable for the intermediary, the latter may benefit consumers and retailers.
Lock-in effects in Online Labor Markets, with Lars Hornuf and Eliza Stenzhorn.
[Latest Version] · [CESifo Working Paper]
Online platforms that implement reputation mechanisms to facilitate transactions and build trust in the market usually prevent the transfer of ratings to other platforms, leading to lock-in effects and high switching costs for users. This situation can be capitalized by platforms, for example, by charging higher fees to their users. In this paper, we theoretically and experimentally investigate the effects of platform pricing on workers' switching behavior in online labor markets and analyze whether a policy regime with reputation portability could mitigate lock-in effects and reduce the likelihood of worker capitalization by the platform. We further examine switching motives more thoroughly and differentiate between monetary motives and fairness preferences. Theoretically, we show the existence of switching costs faced by workers if reputation mechanisms are platform-specific. The model predicts that reputation portability lowers switching costs, eliminating the possibility for platforms to capitalize lock-in effects. We test our predictions using an online lab-in-the-field experiment. The results are in line with our model and suggest that the absence of reputation portability leads to worker lock-in, which can be capitalized by platforms. Moreover, reputation portability has a positive impact on the wages of highly rated workers. The data further show that the switching of workers is primarily driven by monetary motives, but perceiving the fee as unfair also plays a significant role. Finally, we find that workers lower their effort levels after a fee is introduced.
Work in Progress
Privacy as a competition tool
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