Pay, Pat, and Clawback: Incentivizing Service Providers’ Participation in On-Demand Digital Platforms

Abstract

A critical governance challenge for on-demand digital platforms is to increase the participation of their service providers. In this research, we design novel incentive structures by taking the unique features of on-demand digital platforms into account. In 12 micro randomized trials conducted in partnership with a major on-demand digital platform, we examine how combining monetary with nonmonetary incentives and providing them within a loss-aversion framework could motivate service providers to increase their participation levels. We show that in on-demand platforms the nonmonetary incentives inhibit the impact of monetary incentives on service provider participation once they are offered together. Furthermore, in contrast to traditional work settings, offering incentives within a loss-aversion framework only increases the effectiveness of nonmonetary incentives. We provide theoretical explanations and empirical examinations for these counterintuitive results. The insights from this research could be used by on-demand digital platforms to effectively mobilize and sustain their service providers’ participation to meet real-time stochastic demand.