Large-Scale Service Marketplaces: The Role of the Moderating Firm

Abstract

Recently, large-scale, web-based service marketplaces, where many small service providers compete among themselves in catering to customers with diverse needs, have emerged. Customers who frequent these market- places seek quick resolutions and thus are usually willing to trade prices with waiting times. The main goal of the paper is to discuss the role of the moderating firm in facilitating information gathering, operational efficiency, and communication among agents in service marketplaces. Surprisingly, we show that operational efficiency may be detrimental to the overall efficiency of the marketplace. Further, we establish that to reap the “expected” gains of operational efficiency, the moderating firm may need to complement the operational efficiency by enabling communication among its agents. The study emphasizes the scale of such marketplaces and the impact it has on the outcomes.

Keywords: Service operations, Fluid models, Asymptotic analysis, Large games, Non-cooperative game theory