Transaction Cost Economic Analysis: The Case Of Amazon Mechanical Turk And Upwork

When reformulating the Gig Economy phenomenon in a Transaction Cost Economics perspective, Proposition 1 arises: theoretically, the greater the uncertainty in the transaction is, the lower firms will recur to On-Demand services.
In the specific case of Amazon Mechanical Turk and Upwork, uncertainty can be determined as: the degree to which the platforms’ infrastructure protect parties and guarantee the transaction (internal uncertainty); the extent to which different countries regulate temporary forms of employment (external uncertainty).
In AMT, the contract is set unilaterally by the requester, whose can set conditions and refuse to accept performance result while keeping the work done. The counterpart has no room to bargain, and the only
Requesters can give feedbacks to Turkers, feedbacks that impacts the future hiring probability of the worker and incentivize freelancer to have a good performance. Though Turkers cannot rate workers internally, but the diffusion of the platform gave birth to some forum or adds-in (e.g. Turkopticon) where ratings on requesters are given.
Overall, AMT internal uncertainty seems to be relevant, especially on the workers’ side; though given the menial nature of the tasks performed and the added value it gives to companies, this uncertainty does not seem to influence negatively the usage of the platform.
In Upwork, on the other side, the contract can also be bilaterally set by the parties. In case of flexible payment model, the company posts the task and the freelancers make and offer with the hourly rate and the estimated hours need; the company, then, chooses manually the freelancer(s) according to needs and preferences.
The platform shows both workers’ profile – with qualifications, feedbacks and work histories – and Clients’ ratings and task history so that the information asymmetry ex-ante is reduced. The service requester can monitor the work-in-progress and pay only for the hours recorded in the Work diary. Overall, Upwork internal uncertainty is minimized as much as
The index “measures the procedures and costs involved in dismissing individuals or groups of workers and the procedures involved in hiring workers on temporary work agency contracts” (OECD, 2016) and considers “regulation of fixed-term and temporary work agency contracts with respect to the types of work for which their contracts are allowed and their duration; regulation governing the establishment and operation of temporary work agencies; requirements for agency workers to receive the same pay and/or conditions as equivalent workers in the user firm, which can increase the cost of using temporary agency workers relative to hiring workers on permanent contracts; regulation for temporary forms of employment”. Country-specific values are visible in Appendix 3,