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  • February 2021
  • Article
  • Management Science

Trust and Disintermediation: Evidence from an Online Freelance Marketplace

By: Grace Gu and Feng Zhu
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Abstract

As an intermediary improves trust between the two sides of its market to facilitate matching and transactions, it faces an increased risk of disintermediation: with sufficient trust, the two sides may circumvent the intermediary to avoid the intermediary’s fees. In this paper, we investigate the relationship between increased trust and disintermediation by leveraging a randomized control trial in an online freelance marketplace. We find that enhanced trust increases the likelihood of high-quality freelancers being hired. However, when the trust level is sufficiently high, it also increases disintermediation, which offsets the revenue gains from the increase in hiring high-quality freelancers. We also identify heterogeneity across clients and freelancers in their tendencies to disintermediate. We discuss strategies that intermediaries can use to mitigate the tension between trust building and disintermediation.

Keywords

Disintermediation; Intermediaries; Online Marketplace; Platform Strategy; Trust; Marketplace Matching; Digital Platforms

Citation

Gu, Grace, and Feng Zhu. "Trust and Disintermediation: Evidence from an Online Freelance Marketplace." Management Science 67, no. 2 (February 2021): 794–807.
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About The Author

Feng Zhu

Technology and Operations Management
→More Publications

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  • Driving Efficiency and Sustainability at P&G China By: Feng Zhu, Philip Kuai and Billy Chan
  • How to Avoid the Agility Trap By: Jianwen Liao and Feng Zhu
  • Cheerful Music By: Shunyuan Zhang, Feng Zhu and Nancy Hua Dai
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