Moral Hazards and Effects of IT-enabled Monitoring Systems in Online Labor Markets
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2017-01-04
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This paper investigates how IT-enabled monitoring systems mitigate moral hazard in an online labor market and their effect on market competition. We exploit a quasi-experiment at Freelancer when it introduced an IT-enabled monitoring system in 2015. We use a difference-in-differences (DID) approach to identify the treatment effect of the monitoring system on employer contractor choice, market competition, and employer surplus. We found that the IT-enabled monitoring system lowers the employers’ willingness to pay the reputation premiums. Meanwhile, comparing the trend of the control group, the IT-enabled monitoring system raised the employer surplus in hourly projects and increased the number of bids. Our result suggests that IT-enabled monitoring systems have a significant effect on alleviating moral hazards, reducing agency costs, and facilitating market competition.
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moral hazard, monitoring systems, online labor market, reputation systems, contract type
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10 pages
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Proceedings of the 50th Hawaii International Conference on System Sciences
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Attribution-NonCommercial-NoDerivatives 4.0 International
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