Platform Governance of Social Issues

As interest in platform business has grown, several scholars have argued that these platforms can be used to address grand societal challenges and make progress towards the United Nations’ Sustainable Development Goals (e.g., Logue and Grimes, 2019). Central to this argument is the idea that as private marketplaces, platforms have both the incentive and the ability to accumulate data on otherwise unadjudicated aspects of stakeholder behavior (McGahan, 2021) and may therefore act as instruments of self-governance (Liu and Weingast, 2018; Koo and Eesley, 2020; Silverman, 2019). Specifically, the platform owners may leverage their power as market makers to set rules for transactions that enhance equity and transparency and thus solve friction in the prevailing market (Mahoney and Qian, 2014; Oberholzer-Gee and Yao, 2018; Luo and Kaul, 2019; Chu and Wu, 2021), while enhancing the common good of all participants (Ostrom, 1990; 2010).

In our study, we empirically investigate the effectiveness of platform companies to do so by conducting a pre-registered experiment in collaboration with a two-sided labor market platform in Singapore. This platform matches employees/domestic workers (commonly known as “maids” or “helpers”) to employers/families. Interviews suggest that the interactions between helpers and their employers sometimes give rise to abuse, with the most common forms of abuse being verbal, not giving enough food and water to helpers, not allowing them to pray, deducting wages arbitrarily, or not giving them requisite rest time. In rare circumstances, physical and/or sexual abuse may also occur. The presence of these “bad” employers is harmful for the employees as well as other employers, so the platform is incentivized to identify and remove them from the marketplace. 

We examine two questions in this context: 1) whether and under what conditions is the stronger protection for employees/domestic workers (i.e., the rating system) acceptable or preferable for employers/families employing them? and 2) whether and under what conditions is it preferred by employees/domestic workers themselves? To do so, we recruit experimental subjects from both sides of the platform, i.e., employees and employers. Subjects in the treatment condition receive information about the platform’s plan to implement a rating system that allows workers to rate employers (currently, this feature does not exist; only employers can rate workers), while those in the control group receive generic messaging of similar length. For employers only, among those who receive the information about the employer rating system, we also vary the treatment condition by whether the employer rating system is communicated in a basic, pro-social, instrumental, or hybrid manner. Following random assignment of conditions, participants are asked to answer a series of questions about their interest in and commitment to using the platform as well as on relevant experience and demographics. We also supplement the self-reported data with observational data on platform usage. 

Preliminary results from the experiment show that it is the domestic workers themselves who are unsupportive of these measures. Further, the result shows that employers also reacted negatively to the rating system, unless they were under the instrumental condition where the potential for the rating system to help employers by bringing in good workers is highlighted. Taken together, while still preliminary, these results suggest that the use of platforms to address social issues may be substantially more challenging than the existing literature would suggest.

Zoom link: https://eur-nl.zoom.us/j/99951051840