UCL School of Management is delighted to welcome Saif Benjaafar, Minnesota, to host a research seminar discussing ‘Labor Welfare in On-Demand Service Platforms’
We study labor welfare in on-demand service platforms that rely on independent agents who decide on whether and how much to work. Such platforms benefit from having access to a large supply of agents, as the availability of more agents implies lower labor cost and shorter customer delays. It has been argued by some labor advocates that this comes at the expense of agents who see, as a consequence of the expansion of labor supply, lower wages and less work. In this paper, we examine the extent to which the interest of platforms in increasing labor supply is indeed at odds with those of agents. Using an equilibrium model that accounts for the interaction between labor supply and demand, we show that factors that affect labor supply, such as labor pool size, delay cost, and variability in the agents’ opportunity cost, may have a non-monotonic effect on labor welfare. In particular, we identify two regimes, depending on the level of congestion in the system, one in which an expansion of labor supply improves labor welfare and makes agents busier and one in which an expansion of labor supply harms labor welfare and makes agents less busy. We compare these results to those obtained in a setting where customers are not sensitive to delay and to settings where agents must commit to working a specified amount time and are compensated at a fixed wage rate. (Joint work Jian-Ya Ding, Guangwen Kong, and Terry Taylor).