Customer Voice on Two-Sided Platforms: The Effect of Surge Pricing on Customer Complaints

Two-sided platforms (e.g., ride-sharing, freelance labor, and lodging) match customers and service providers. Customers can voice their satisfaction level through review/rating systems, which the platforms use to monitor and screen service providers. However, customers may misdirect complaints about platform-level features toward individual service providers. We examine the extent and consequences of this issue in the context of a large ride-sharing platform. We focus on surge pricing as the platform-level feature. Our findings are as follows. First, for an average trip, surge pricing makes it 1.13 times more likely for the driver to receive a complaint (either a low rating or a formal complaint). Second, complaints negatively impact a driver’s future income. Surge-induced complaints offset about 23% of a driver’s immediate gain from the surged fare. Third, after the platform adopted a policy to cap the magnitude of surge prices, the effect of surge on customer complaints reduced. The policy also led to more usage of the platform. The results suggest a close interaction between the pricing and review systems on ride-sharing platforms. More broadly, they point to the importance for online two-sided platforms to identify and address customer complaints about platform-level features that may have been misdirected to service providers. This paper was accepted by Eric Anderson, marketing. Funding: Y. Zhu acknowledges financial support from 3M [Nontenured Faculty Grant]. Supplemental Material: The data files are available at https://doi.org/10.1287/mnsc.2024.4992 .

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Publication Details

Journal
Management Science
Published
2024-11-18
DOI
https://doi.org/10.1287/mnsc.2024.4992
Citations
6
Primary Topic
Consumer Market Behavior and Pricing
Type
article
Field-Weighted Citation Impact
1.76
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article

Customer Voice on Two-Sided Platforms: The Effect of Surge Pricing on Customer Complaints

Yi Zhu, Yanhao Wei, Linli Xu
6 citations
Management Science
Consumer Market Behavior and Pricing
1.76
article

Customer Voice on Two-Sided Platforms: The Effect of Surge Pricing on Customer Complaints

Yi Zhu, Yanhao Wei, Linli Xu
article en
6 citations

Abstract

Two-sided platforms (e.g., ride-sharing, freelance labor, and lodging) match customers and service providers. Customers can voice their satisfaction level through review/rating systems, which the platforms use to monitor and screen service providers. However, customers may misdirect complaints about platform-level features toward individual service providers. We examine the extent and consequences of this issue in the context of a large ride-sharing platform. We focus on surge pricing as the platform-level feature. Our findings are as follows. First, for an average trip, surge pricing makes it 1.13 times more likely for the driver to receive a complaint (either a low rating or a formal complaint). Second, complaints negatively impact a driver’s future income. Surge-induced complaints offset about 23% of a driver’s immediate gain from the surged fare. Third, after the platform adopted a policy to cap the magnitude of surge prices, the effect of surge on customer complaints reduced. The policy also led to more usage of the platform. The results suggest a close interaction between the pricing and review systems on ride-sharing platforms. More broadly, they point to the importance for online two-sided platforms to identify and address customer complaints about platform-level features that may have been misdirected to service providers. This paper was accepted by Eric Anderson, marketing. Funding: Y. Zhu acknowledges financial support from 3M [Nontenured Faculty Grant]. Supplemental Material: The data files are available at https://doi.org/10.1287/mnsc.2024.4992 .

Management ScienceVol. 71(8)
University of Southern California (US), University of Minnesota (US)
Decent work and economic growth
Openalex Percentile: Top 13%
Consumer Market Behavior and Pricing
1.76
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Customer Voice on Two-Sided Platforms: The Effect of Surge Pricing on Customer Complaints — Yi Zhu, Yanhao Wei, et al. · Management Science (2024) | TGRS Research Map | TGRS