A smarter way to match gig workers with consumers

Millions of Americans tap their smartphone screens daily to order rides, groceries or dinner, hooked on the seamless convenience of the gig economy. Yet beneath this frictionless interface lies a brewing war.

On one side, consumers are squeezed by volatile and erratic surge pricing, which adjusts to reflect spiking demand or dropping supply. On the other, gig workers face manipulative algorithmic payouts, erratic schedules and the skyrocketing costs of keeping their cars on the road.

For years, gig-economy executives have wielded the blunt instrument of surge pricing to manage their workforce. It treats human labor as a frictionless commodity. The logic is simple: If the number of drivers drops, throw more cash into the pool, and supply will correct itself.

But there’s a huge catch. This strategy has created severe market friction, leaving consumers frustrated by high prices and platforms struggling with widespread driver shortages. Compounding the issue, fresh research shows that drivers don’t actually benefit from surge pricing and are increasingly demanding compensation reforms.

As business professors who study consumer psychology and supply chains, we analyzed 2 million delivery tasks, completed by over 70,000 drivers for a Fortune 500 retailer from February through April 2022, to unpack this problem. We discovered that gig workers aren’t just driven by money. They’re sophisticated micro-entrepreneurs who perform a strict “mental audit” of every single task to see if it’s worth their time – before hitting the “accept” button.

By understanding these hidden frictions among drivers, platforms can stop overcharging consumers and start designing work that aligns with the drivers’ preferences and makes their jobs more satisfying.

Read the full article published on The Conversation

About the authors

• David Dobrzykowski, Bickerstaff Chair of Supply Chain Management at Auburn University’s Harbert College of Business, where he serves as department chair
• Christopher S. Tang, Edward W. Carter Chair in Business Administration at UCLA’s Anderson School of Management
• Nicolo Masorgo, assistant professor in the Farmer School of Business at Miami University