Trust and Disintermediation: Evidence from an Online Freelance Marketplace

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.

Automated summary

Building trust on a platform can enhance transactions but also brings the risk of disintermediation. The research shows that increasing trust can lead to higher chances of hiring high-quality freelancers, but excessive trust may result in disintermediation, offsetting revenue gains. There are differences in tendencies of clients and freelancers towards disintermediation, and strategies can be implemented to mitigate the tension between trust-building and disintermediation.