UCL School of Management is delighted to welcome Damian Beil, Michigan, to host a research seminar discussing ‘Outsourcing of non-routine services.’
In the first part of this talk, I will discuss a paper in which we empirically examine the impact of performance feedback on the outcome of crowdsourcing contests for a simple non-routine service (logo design). We develop a dynamic structural model to capture the economic processes that drive contest participants’ behaviour, and estimate the model using a rich data set collected from a major online crowdsourcing design platform. The model captures key features of the crowdsourcing context, including a large participant pool, entries by new participants throughout the contest, exploitation (revision of previous submissions) and exploration (radically novel submissions) behaviors by contest incumbents, and the participants’ strategic choice among these entry, exploration, and exploitation decisions in a dynamic game. We find that the cost associated with exploratory actions is higher than the cost associated with exploitative actions. High-performers prefer the exploitative strategy, while low performers tend to make fewer follow-up submissions and prefer the exploratory strategy. Using counterfactual simulations, we compare the outcome of crowdsourcing contests under alternative feedback disclosure policies and award levels. Our simulation results suggest that the full feedback policy (providing feedback throughout the contest) may not be optimal. The late feedback policy (providing feedback only in the second half of the contest) leads to a better overall contest outcome. This work is joint with Zoey Jiang and Yan Huang.
In the second part of this talk, I will discuss managing an extremely complex non-routine service (outsourced litigation). In this setting, hourly “narrative” bills are commonplace, creating opportunities for the service provider (e.g., outside counsel) to drive up costs for the buyer (e.g., in-house counsel) through the inefficient use of time (e.g., rework) and resources (e.g., partner versus associate). The buyer can manage these costs with greater transparency about planned and completed processes; however, this transparency comes at a cost. Informed by work with a firm in this space, we take the perspective of a third-party provider of transparency for outsourced litigation and develop an analytical model of the value of transparency on various litigation processes. We explore how overbilling opportunities, case complexity, and the outside counsel’s propensity for overbilling affect this value. This work is joint with Jacob Chestnut.