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Large-Scale Service Marketplaces: The Role of the Moderating Firm

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Book cover Sharing Economy

Part of the book series: Springer Series in Supply Chain Management ((SSSCM,volume 6))

Abstract

Recently, large-scale, web-based service marketplaces, where many small service providers compete among themselves in catering to customers with diverse needs, have emerged. Customers who frequent these marketplaces seek quick resolutions and thus are usually willing to trade prices with waiting times. The main goal of the paper is to discuss the role of the moderating firm in facilitating information gathering, operational efficiency, and communication among agents in service marketplaces. Surprisingly, we show that operational efficiency may be detrimental to the overall efficiency of the marketplace. Further, we establish that to reap the “expected” gains of operational efficiency, the moderating firm may need to complement the operational efficiency by enabling communication among its agents. The study emphasizes the scale of such marketplaces and the impact it has on the outcomes (This chapter is based on our published paper (see Allon et al., Manag Sci 58:1854–1872, 2012).).

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Notes

  1. 1.

    This is based on data obtained from UpWork.com for about 10,000 randomly chosen transactions.

  2. 2.

    Our model can also be used to study a setting where customers incurs waiting cost also during their service. One can incorporate that by modifying the customer reward from R to R − c∕μ.

  3. 3.

    We will discuss a model with heterogenous agents in Sect. 9.7.

  4. 4.

    + M notation denotes the exponential abandonment times.

  5. 5.

    Note that an agent can process more than one jobs at the same time in certain settings. In such settings, a processor sharing model will be a more appropriate queueing model, yet these models are known to be significantly more complex than our queueing model. Our model can be viewed as an approximation of such settings.

  6. 6.

    Focal-point effects are any psychological or cultural norms that tends to focus players’ attention on one equilibrium.

  7. 7.

    According to the definition in Gradwohl and Reingold (2008), a Nash Equilibrium is resilient to coalitions if players cannot improve their revenues “too much” even after a coordinated deviation. In our setting, “too much” has to be almost as much as the customer reward, R, in order to apply their results to our game. Clearly, this makes the definition of resilience vacuous because none of the agents can increase his revenue by more than R.

  8. 8.

    In a given marketplace, the total revenues of the agents cannot exceed \(\min \{\varLambda ,k\}R\) since they cannot charge more than R, and their effective demand is the minimum of their processing capacity and the aggregate demand.

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Author information

Authors and Affiliations

  1. University of Pennsylvania, Philadelphia, PA, USA

    Gad Allon

  2. Northwestern University, Evanston, IL, USA

    Achal Bassamboo

  3. University of Oregon, Eugene, OR, USA

    Eren B. Çil

Authors
  1. Gad Allon
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  2. Achal Bassamboo
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  3. Eren B. Çil
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Correspondence to Gad Allon .

Editor information

Editors and Affiliations

  1. Rotman School of Management, University of Toronto, Toronto, ON, Canada

    Ming Hu

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Allon, G., Bassamboo, A., Çil, E.B. (2019). Large-Scale Service Marketplaces: The Role of the Moderating Firm. In: Hu, M. (eds) Sharing Economy. Springer Series in Supply Chain Management, vol 6. Springer, Cham. https://doi.org/10.1007/978-3-030-01863-4_9

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