Platform-mediated reputation systems in the sharing economy and incentives to provide service quality: the case of ridesharing services

Sharing economy platforms often use reputation systems to actively perform a ‘regulatory’/control role, by excluding from access to the platform users with ratings below a given threshold. We provide a multiple case study analysis of 9 platforms and investigate through a simple inter-temporal choice model the effect of the design of this specific application of online rating systems on users/providers’ incentives to ensure a high level of service quality. Compliance with the platform’s behavioural rules is imperfect even with perfect reviews and even if riders cannot switch across platforms. It can be increased by linking remuneration to performance and by increasing the opportunity cost of reintegrating the endowment of reputation, also by influencing providers’ perception of the magnitude of this cost. Thus, there may be an efficiency rationale for the controversial choice to willingly preserve riders’ uncertainty as to the operation of the algorithm and for portability of reputation.