A simple comparative model of worker-managed and capital-managed digital platforms

We develop a simple model to study the comparativestatics of worker‐managed (WM) and capital‐managed(CM) app‐based labor platforms. The model assumesthat algorithmic management makes free‐riding andcollective decision‐making costs negligible and high-lights different pay policies as the distinctive featuredifferentiating WM and CM platforms, in an environ-ment where workers are financially constrained andcapital markets are imperfect. With very simplealgebra, we show that WM platforms may show greatercost efficiency and may be better able to benefit fromnetwork effects with respect to CM competitors. Yet,viability of WM firms may be critically impeded by theextra‐cost of the external capital, which enables CMplatforms to pay a wage premium. The optimal paypolicy of CM platforms is shown to vary depending onthe intensity of network effects. Reported anecdotalevidence is compatible with main model's results.