Last week Professor Lars Hornuf presented his project Lock-in Effects in Online Labor Markets at the CESifo Area Conference on the Economics of Digitization 2021 in München.
Together with his coauthors Fabrizio Ciotti und Eliza Stenzhorn, Professor Lars Hornuf analyzes the role of lock-in exploitation and the impact of reputation portability on workers’ switching behavior in online labor markets. Online platforms using reputation mechanisms typically prevent users to transfer their ratings to other platforms. This leads to lock-in effects and high switching costs, which make users vulnerable to platform exploitation. The researchers build a theoretical model in which workers in online labor markets are locked-in because of their reputational data and test its prediction in an online lab-in-the-field decision experiment. They compare a policy regime with and without reputation portability. Furthermore, they vary lock-in exploitation with platform fees to study switching behavior based on monetary motives and fairness preferences. Theoretically, they show how reputational investments can become switching costs that platforms can exploit. Experimentally, the results suggest that reputation portability mitigates lock-in effects, making users less susceptible to lock-in exploitation. The data further show that switching is foremost driven by monetary motives, but fairness preferences also play a significant role.