Buyer uncertainty about seller capacity: Causes, consequences, and a partial solution
Published: Management Science 65(8): 3518-3540 (2019)
Last updated: 2019-08
Summary
Employers in an online labor market often pursue workers with little capacity to take on more work. The pursuit of low-capacity workers is consequential, as these workers are more likely to reject employer inquires, causing a reduction in the probability a job opening is ultimately filled. In an attempt to shift more employer attention to workers with greater capacity, the market-designing platform introduced a new signaling feature into the market. It was effective, in that when a worker signaled having high capacity, he or she received more invitations from employers, rejected a smaller fraction of those invitations, quoted a lower price to do the work, and was more likely to be hired. A back-of-the-envelope calculation suggests the signaling feature alone could increase market surplus by as much as 6%, both by increasing the number of matches formed and by helping to allocate projects to workers with lower costs.
Paper links
PDF · Management Science · SSRN
Cite
@article{horton2019buyeruncertaintyaboutsellercapacitycausesconsequencesandapartialsolution,
title = {{Buyer Uncertainty About Seller Capacity: Causes, Consequences, and a Partial Solution}},
author = {Horton, John J.},
journal = {Management Science},
year = {2019},
volume = {65},
number = {8},
pages = {3518-3540},
doi = {10.1287/mnsc.2018.3116},
url = {https://doi.org/10.1287/mnsc.2018.3116}
}