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  • July 2021
  • Article
  • Management Science

Outsourcing Tasks Online: Matching Supply and Demand on Peer-to-Peer Internet Platforms

By: Zoë Cullen and Chiara Farronato
  • Format:Print
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Abstract

We study the growth of online peer-to-peer markets. Using data from TaskRabbit, an expanding marketplace for domestic tasks at the time of our study, we show that growth varies considerably across cities. To disentangle the potential drivers of growth, we look separately at demand and supply imbalances, network effects, and geographic heterogeneity. First, we find that supply is highly elastic: in periods when demand doubles, sellers perform almost twice as many tasks, prices hardly increase, and the probability of requested tasks being matched falls only slightly. The first result implies that in markets where supply can accommodate demand fluctuations, growth relies on attracting buyers at a faster rate than sellers. Second and perhaps most surprisingly, we find no evidence of network effects in matching: doubling the number of buyers and sellers only doubles the number of matches. Third, we show that the cities where market fundamentals promote efficient matching of buyers and sellers are also those that are the fastest-growing. This heterogeneity in matching efficiency is related to two measures of market thickness: geographic density (buyers and sellers living close together) and level of task standardization (buyers requesting homogeneous tasks). Our results have two main implications for peer-to-peer markets in which network effects are limited by the local and time-sensitive nature of the services exchanged. First, marketplace growth largely depends on strategic geographic expansion. Second, a competitive rather than winner-take-all equilibrium may arise in the long run.

Keywords

Two-sided Market; Two-sided Platforms; Peer-to-peer Markets; Platform Strategy; Sharing Economy; Platform Growth; Internet and the Web; Digital Platforms; Strategy; Market Design; Network Effects

Citation

Cullen, Zoë, and Chiara Farronato. "Outsourcing Tasks Online: Matching Supply and Demand on Peer-to-Peer Internet Platforms." Management Science 67, no. 7 (July 2021).

Supplemental Information

Appendix
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About The Authors

Zoe B. Cullen

Entrepreneurial Management
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Chiara Farronato

Technology and Operations Management
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More from the Authors
  • Increasing the Demand for Workers with a Criminal Record By: Zoë Cullen, Will Dobbie and Mitchell Hoffman
  • Is Pay Transparency Good? By: Zoë Cullen
  • Self-Preferencing at Amazon: Evidence from Search Rankings By: Chiara Farronato, Andrey Fradkin and Alexander MacKay
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