Ashish Kabra

 

Faculty Candidate Ashish Kabra  [INSEAD] 
Title Designing Incentives to Scale Marketplaces
Date & Time Wednesday, February 8, 2017
Place UCLA Anderson School of Management 
Room A202

 

Abstract
Achieving scale is key to the efficacy, survival and eventual domination of peer- to-peer marketplaces. Marketplace operators often run aggressive promotions and incentive schemes to attract new users or increase the usage of existing users. This study quantifies and compares the effect of incentives given to the "buyer" side and "seller" side of the marketplace. Specifically, using data from one of the leading ride-hailing marketplace, we estimate the effect of passenger incentives and driver incentives on number of trips arranged through the marketplace. Further, the incentives can be designed in different formats, i.e. they could be given for every use (linear incentives) or could be given only upon a certain level of use (threshold incentives). We build a structural model to accurately capture the driver and passenger response to incentives, and the nature of incentives. We take into account the effect of service levels on passenger and driver behavior and their endogenous realization in the system, as well as the cross externalities and economies of scale effects. Driver effort on the platform is unobserved, for which we devise a novel local matching model based imputation method. We find that in short-term (current week) passenger incentives are more effective than similar driver incentives. In long-term (next 3 months), the opposite is true; driver incentives are more effective than passenger incentives. This change of effects is determined by the differential stickiness of passengers and drivers to the platform, as well as differential response to evolving service levels. When structuring driver incentives, it is more effective to use threshold incentives compared to linear incentives. The marketplace exhibits substantial economies of scale. For every doubling of passenger and driver numbers, the number of trips more than doubles, it increases by further 25%.



Ashish Kabra