Share and share alike…

The Sharing Economy (or the Gig Economy, or the Collaborative Economy) is a model that’s disrupting inefficient industries in ways that provide a more convenient experience for the consumer and change the nature of work for the provider.  The Economics and Statistics Administration of the U.S. Commerce Department issued a report in June 2016 defines this sector through the four following characteristics:

  • They use information technology (IT systems), typically available via web-based platforms, such as mobile “apps” on Internet- enabled devices, to facilitate peer-to-peer transactions.
  • They rely on user-based rating systems for quality control, ensuring a level of trust between consumers and service providers who have not previously met.
  • They offer the workers who provide services via digital matching platforms flexibility in deciding their typical working hours.
  • To the extent that tools and assets are necessary to provide a service, digital matching firms rely on the workers using their own.

As the implications of the sharing economy are being debated, one area is getting a good amount of focus from researchers and the press.  It relates to whether the sharing economy is simply bringing more wage-earning opportunities to more people, or whether its net effect is the displacement of traditionally secure jobs and the creation of a land of part-time, low-paid work.

I believe it’s in this debate that reputation, of both the buyers and sellers, will prohibit a race to the bottom in terms of quality provided by the provider and lowest price provided by the buyer.  In other words, a favorable provider reputation will extract value out of this efficient value chain through a higher demand for services which the provider can ask a higher price for than a similar provider with an unfavorable reputation or none at all. Conversely, a favorable buyer reputation will demonstrate value for the buyer through more options at a lower cost than a buyer with a limited or unfavorable reputation.

I think it’s time to explore the notion of online reputation.  More to come.

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