Grace Gu

With the development of communication technology that makes online transactions easier, there is also an increased risk of disintermediation—sellers and buyers circumventing a platform to transact directly—in online two-sided marketplaces. Such disintermediation may lead to significant revenue loss for online platforms. However, it remains unclear how the characteristics of platforms affect their vulnerability to disintermediation. Using the blockade of Skype in mainland China as a natural experiment, this study examines how online communication technologies affect disintermediation and transaction outcomes in a large US online freelance marketplace. The results show that restricting this alternative communication technology, which platforms struggle to monitor, reduces disintermediation by around 18%. This effect is potentially due to economic frictions in transactions, as the reduction in disintermediation is greater for high-transaction-cost jobs, such as time-sensitive jobs, communication-intensive jobs, and high-skilled jobs, as well as for cost-sensitive users, such as experienced users and personal users as opposed to enterprise users. With these results, platforms can reduce disintermediation risks when making investment and market entry decisions.

As a platform improves trust between the two sides of its market to facilitate matching and transactions, it faces an increased risk of disintermediation: with sufficient trust, the two sides may circumvent the platform to avoid the platform’s fees. In this paper, we investigate the relationship between increased trust and disintermediation by leveraging a randomized control trial in an online freelance marketplace. We find that enhanced trust increases the likelihood of high-quality freelancers being hired. However, when the trust level is sufficiently high, it also increases disintermediation, which offsets the revenue gains from the increase in hiring high-quality freelancers. We also identify heterogeneity across clients and freelancers in their tendencies to disintermediate. We discuss strategies that platforms can use to mitigate the tension between trust building and disintermediation.

Online communities bring together participants from diverse backgrounds and often face challenges in aggregating their opinions. We infer lessons from the experience of individual contributors to Wikipedia articles about U.S. politics. We identify two factors that cause a tendency toward moderation in collective opinion: Either biased contributors contribute less, which shifts the composition of participants, or biased contributors moderate their own views. Our findings show that shifts in the composition of participants account for 80%–90% of the moderation in content. Contributors tend to contribute to articles with slants that are opposite their own views. Evidence suggests that encountering extreme contributors with an opposite slant plays an important role in triggering the composition shift and changing views. These findings suggest that collective intelligence becomes more trustworthy when mechanisms encourage confrontation between distinct viewpoints. They also suggest, cautiously, that managers who aspire to produce content “from all sides” should let the most biased contributors leave the collective conversation if they can be replaced with more moderate voices.