Online labor markets, as an experimental lab

There are a growing number of online labor markets (for a description of a wide range, see Work the New Digital Sweatshops By Jonathan Zittrain).


A recent paper explores their use for conducting experiments: The Online Laboratory: Conducting Experiments in a Real Labor Market by John Horton, David Rand and Richard Zeckhauser . They suggest that Amazon's Mechanical Turk is a convenient venue to do experiments, with some natural advantages (e.g. it's possible to recruit large numbers of participants, who don't need to know they are in an experiment), in which adequate control is possible.


"Abstract: "Online labor markets have great potential as platforms for conducting experiments, as they provide immediate access to a large and diverse subject pool and allow researchers to conduct randomized controlled trials. We argue that online experiments can be just as valid – both internally and externally – as laboratory and field experiments, while requiring far less money and time to design and to conduct. In this paper, we first describe the benefits of conducting experiments in online labor markets; we then use one such market to replicate three classic experiments and confirm their results. We confirm that subjects (1) reverse decisions in response to how a decision-problem is framed, (2) have pro-social preferences (value payoffs to others positively), and (3) respond to priming by altering their choices. We also conduct a labor supply field experiment in which we confirm that workers have upward sloping labor supply curves. In addition to reporting these results, we discuss the unique threats to validity in an online setting and propose methods for coping with these threats. We also discuss the external validity of results from online domains and explain why online results can have external validity equal to or even better than that of traditional methods, depending on the research question. We conclude with our views on the potential role that online experiments can play within the social sciences, and then recommend software development priorities and best practices. "

Outsourcing online courtship

The Washington Post has a story about services (like Virtual Dating Assistants) that allow online courtship to be outsourced: Online dating assistants help the lonely and busy

"Last June, Valdez, now 25, founded Virtual Dating Assistants -- a company that "specializes in making the dating dreams of busy individuals come true."

"Author Timothy Ferriss popularized the concept when he wrote about outsourcing his online dating accounts to teams of competing writers in his 2007 book, "The 4-Hour Work Week."

"Valdez's Atlanta-based firm is hardly the only outfit to offer such services. Dozens of profile-writing shops such as Arlington County-based TargetLove have popped up in the past few years, and dating coaches are increasingly managing their clients' online pursuits. Not to mention the well-intentioned friends and relatives who have taken over the process for the hapless singles in their lives.

"But Valdez and his team of 45 freelance writers, including Hartshorn, do it all: write a client's profile, pick out potential matches, send introductory e-mails and message back and forth until a date is confirmed. Then they turn over the correspondence and tell the lucky fellow where and when he's meeting Madame X. (And it's almost always that gender dynamic; 80 percent of the firm's clients are men.)...

"Mark Brooks, founder of Online Personals Watch, a site that tracks Internet dating trends, says this type of outsourcing is an ethically questionable form of "misrepresentation." Still, he expects the field to grow.

"Professional matchmakers often charge $5,000 or more a year and have a limited pool of matches. Online dating sites are populated with countless singles but can require more attention than some users are willing to devote. "It may look like instant gratification, like you dive into the pool and instantly come up with a fish, but it doesn't really work like that," Brooks says. "You've got to tap, tap, tap on the keyboard quite a lot to get anywhere."

Matrimony and dating sites with attitude

The NY Times reports on the market for online dating and marriage sites that have ideas about who should be matched with whom: Better Loving Through Chemistry.

"Now, a handful of dating Web sites are competing to impose some science, or at least some structure, on the quest for love by using different kinds of tests to winnow the selection process. In short, each of these sites is aiming to be the Netflix of love.
Instead of using a proprietary algorithm to recommend movies you might enjoy, based on your past choices, however, these dating sites offer you a list of romantic candidates whose selection is based on proprietary analyses of personality characteristics or biological markers.

Consider ScientificMatch.com, founded about two years ago, which aims to create romantic chemistry via genetic testing. The site, which matches people based on certain genetic markers for the immune system, takes its cue from studies showing that women are more attracted to the smell of men who have very different immune systems from their own. The site charges $1,995.95 for a lifetime membership — the lofty fee includes a cheek swabbing kit, DNA processing, a criminal and bankruptcy background check, as well as verification of age and marital status, the site says.
Then there’s Chemistry.com, started in 2006 by the dating giant Match.com. Helen Fisher, the biological anthropologist who developed Chemistry.com’s questionnaire, says the site is designed to predict compatibility based on traits of temperament like adventurousness, decisiveness or empathy. And it charges a premium for its services: about $50 for a one-month membership, compared with about $35 for Match.com.
But both ScientificMatch.com and Chemistry.com are refinements of an idea originally developed by eHarmony.com. "

..."Online dating is a $976 million annual industry in the United States, according to estimates from Marketdata Enterprises, a research firm. So, to stand out among hundreds of mass-market, open-community sites that attract everyone from people trolling for quick hookups to those headed for holy matrimony, a few services offer more elaborate mate-finding methods.
They build brand identity when they “target people who are looking for relationships rather than just dating,” says John LaRosa, the research director at Marketdata Enterprises. That means matchmaking sites with fewer users can charge more per subscriber than larger sites that list online personals.
Match.com, with an estimated 1.2 million paid subscribers, had revenue of about $365 million in 2008, Mr. LaRosa estimates. EHarmony, meanwhile, with about 656,000 paid members, had estimated revenue of $216 million that year, he says. "

Prostitution and the internet

Scott Cunningham and Todd Kendall have two papers on prostitution, which discuss among other things how sex is sold on the internet:

“Prostitution, Technology and the Law: New Data and Directions” in Handbook on Family Law and Economics, Edward Elgar, Forthcoming 2010.

“Sex for Sale: Online Commerce in the World’s Oldest Profession in Crime Online: Correlates, Causes and Controls, ed. Tom Holt, Carolina Academic Press, Forthcoming 2010.

Along with sites that offer sex for sale, there's been a growth in sites that offer customer reviews. E.g. PunterNet, a site that reviews British prostitutes (but is on a California computer) became briefly famous when a British politician announced that she would ask California's governator to shut it down: Terminate degrading site - Harman "Harriet Harman says she has asked California governor Arnold Schwarzenegger to shut down a website containing reviews of prostitutes."

Here's a paper on wages as a function of age for a similar website for US 'escort' services: The Wages of Sin by Lena Edlund, Joseph Engelberg and Christopher A. Parsons

Market for class notes, posted by students

There are lots of sites that sell study aids to college students, and there are lots of college courses whose notes are posted online (e.g. see my courses on Market Design and Experimental Economics). The Boston Globe reports on a site, FinalsClub.org, that pays students to post their class notes, after getting permission of the professor. Some of my Harvard colleagues have given their permission, and some have not.

Your computer as a marketplace for internet browsers

Microsoft Makes New Concessions to Settle Browser Case
"Microsoft has agreed to reconfigure its Windows operating system in Europe to address two main complaints from rival Internet browser makers, a concession that could lead to the settlement of its latest antitrust case before the European Commission.
A person familiar with the commission’s plans said Microsoft had agreed to change the display of a ballot screen that European Union consumers would use to automatically download an Internet browser for their Windows-based computers.
Microsoft has agreed to randomly generate the logos of the major browser makers on the ballot screen, as well as to remove the Windows Internet Explorer logo from the screen frame, said the person, who was not authorized to speak publicly on the plan.
The changes were requested by Opera, a Norwegian browser maker, Mozilla and Google as preconditions to closing the case before European officials. Rival browser makers had been upset that Microsoft had planned to list the browser choices alphabetically, giving Apple’s Safari browser an advantage."

DARPA Red balloons at MIT

The DARPA network challenge has been won by the MIT team: MIT wins $40,000 prize in nationwide balloon-hunt contest

"On MIT's Web site, a link was posted inviting people to sign up to help find the balloons and urging them to invite their friends. It said the MIT Red Balloon Challenge Team "is interested in studying information flow in social networks, so if we win, we're giving all the money away to the people who help us find the balloons!"
It detailed a chain for giving away the money, beginning with $2,000 given to each person who first sent in the coordinates of each balloon.
"We're giving $2,000 per balloon to the first person to send us the correct coordinates, but that's not all -- we're also giving $1,000 to the person who invited them. Then we're giving $500 whoever invited the inviter, and $250 to whoever invited them, and so on..." it said."

Here are some of the details from the MIT site linked to above...
The Challenge
This Saturday, December 5th, DARPA will be deploying 10 large, red weather balloons at 10 fixed locations in the United States. (more info) DARPA is giving $40,000 to the first team of people to find all 10 balloons. Join the MIT team, invite your friends and you can win money, help science, and help charity! (see how it works) .

Internet resources for the homeless

Being homeless does not necessarily mean being cut off from the internet. The Boston Globe reports Online sites offer a fertile venue for some in need

"On Homelessforums.org, thousands of people post questions and comments about everything from how to stay safe on the streets to where to camp for free. There are pleas for money on CyberBeg.com, which compares itself to a lottery, and Begslist.blogspot.com, which describes itself as a “source for free . . . e-panhandling, online donations, debt help, finding financial resources, and a great place to ask for financial help from the kindness of others.’’

Congestion in online job search

Companies that post job openings online get access to many resumes, but may have trouble sorting through them. Phyllis Korrki writes: Where, Oh Where, Has My Application Gone?
"GETTING a rejection letter is a painful part of job hunting, but at least it means you’ve been noticed. These days, I’ve been hearing about more job hunters who respond to online job postings, only to hear nothing back from the company. Ever."
"...before you get too angry at companies that ignore you, consider what they are up against.
First, the Internet has made it absurdly easy to apply for jobs. This means that unqualified people are clogging the system with their wing-and-a-prayer applications.
Then add rising numbers of unemployed people. More job seekers — qualified, unqualified and desperate — are hitting the send button. Acknowledgments are going by the wayside as recruiters confront hundreds of applications for a single job.
In fact, organizations received 75 percent more applications, on average, in the first half of 2009, compared with the same period in 2008, according to a survey by the Corporate Executive Board, a network of executives and a research company. "

How about business-oriented social networks liked LinkedIn, in which people can recommend each other?
" "Obtaining an employee referral is a good move, as far as it goes. There is just one problem: Nowadays “the referral channel is jammed in the same way that other channels are jammed,” Mr. Safferstone said."

Your penny for my two cents: micropayments on the web

Even if you are prepared to pay a penny for my thoughts, the transaction costs would likely deter you, unless the payment can be made automatically. This is the problem facing micropayments in particular, and it makes it hard for newspapers to charge for news.

Harvard's Neiman Journalism Lab reports on Google's marketplace proposal, which would allow customers to maintain a Google account that could be billed without requiring the customer to maintain accounts or reveal information to each content provider: Google developing a micropayment platform and pitching newspapers: “‘Open’ need not mean free”

People are experience goods (online dating version)

What do you get when you cross an online dating site with speed dating? Virtual Date... Here's an interesting paper on adding some texture to the online dating marketplace.

Frost, Jeana H., Zoe Chance, Michael I. Norton, and Dan Ariely. People Are Experience Goods: Improving Online Dating with Virtual Dates. Journal of Interactive Marketing 22, no. 1 (winter 2008): 51-62.

Abstract: "We suggest that online dating frequently fails to meet user expectations because people, unlike many commodities available for purchase online, are experience goods: Daters wish to screen potential romantic partners by experiential attributes (such as sense of humor or rapport), but online dating Web sites force them to screen by searchable attributes (such as income or religion). We demonstrate that people spend too much time searching for options online for too little payoff in offline dates (Study 1), in part because users desire information about experiential attributes, but online dating Web sites contain primarily searchable attributes (Study 2). Finally, we introduce and beta test the Virtual Date, offering potential dating partners the opportunity to acquire experiential information by exploring a virtual environment in interactions analogous to real first dates (such as going to a museum), an online intervention that led to greater liking after offline meetings (Study 3)."

Rental market for textbooks

Here's a story about Chegg.com, which rents textbooks: We Rent Movies, So Why Not Textbooks?

"Yet the Craigslist model didn’t work. When classes ended in the spring, sellers couldn’t find many buyers online and sold their used books to the college store, often for pennies on the dollar. By the time students migrated back to campus in the fall, willing online sellers were few and far between. "
...
"With demand for good deals on textbooks running high, Chegg’s success comes in large part from being able to address those inefficiencies. While Chegg primarily rents books, it is also essentially acting as a kind of “market maker,” gathering books from sellers at the end of a semester and renting — or sometimes selling — them to other students at the start of a new one. "

See also http://www.bookrenter.com/, http://www.bookswim.com/, http://www.campusbookrentals.com/...

Hal Varian on ad auctions

Muthu Muthukrishnan at Google in NY has a nice post about Hal Varian, Google's chief economist and a pioneer of the economics of the internet (among other things*). Here is a youtube video in which Hal gives an elementary explanation of Google's ad auction. MR points to this article about Hal in Wired: Secret of Googlenomics: Data-Fueled Recipe Brews Profitability.

Here is Hal's recent paper Online Ad Auctions, forthcoming in the May 2009 AER Papers and Proceedings. Here is Hal's earlier paper, Position Auctions, published in the 2007 International Journal of Industrial Organization. One nice thing about both these papers is that they explicitly take note of the link between ad auctions and the matching literature.

*Hal is the original Renaissance economist. Aside from his academic work on subjects from the internet to public goods provision, he's an author of bestselling texts and business books, and was for many years a NY Times columnist. One of his columns, When Economics Shifts From Science to Engineering, August 29, 2002, on the subject of market design, was about a paper of mine. When I marveled at how succinctly he was able to summarize, he told me that his secret (quoting Elmore Leonard) was to "leave out the parts that people skip."

Market for adultery, in a recession

In an earlier post, I mentioned a website that caters to married people seeking an affair. It turns out that the business is countercyclical:
Adultery business cashes in on world's recession worries
"At the Ashley Madison agency, which revels in the motto, "Life is short. Have an affair," the global economic downturn is proving a boon for business. "

"Membership has soared from one million to 3.6 million in just 12 months, and he expects another surge after the company launched a service allowing members to access the site from their mobile phones. The innovation is aimed at would-be cheaters who are nervous about leaving evidence of their infidelity on their computer at home or work.
Mr Biderman said that many couples who would otherwise have divorced were seeking affairs at the moment because of the cost of hiring lawyers and the difficulty of selling the marital home. "

Marriage and dating online in Korea

Soohyung Lee has a paper about an online marriage market in Korea, whose findings are similar in some respects to those in the papers described in my two earlier posts today, and different in others: Preferences and Choice Constraints in Marital Sorting: Evidence From Korea.

Like the paper by Hitsch, Hortaçsu, and Ariely, Lee's paper considers detailed transactional data from an online site, this one aimed at marriage rather than more casual dating, and uses the data to estimate preferences for mates, based on a variety of observable traits. Like both Hitsch et al. and the paper on Indian marriages by Banerjee, Duflo, Ghatak and Lafortune, Lee's paper looks at stable matches produced by a deferred acceptance algorithm based on the estimated preferences, and compares them to the observed marriages in population data. Unlike those two papers, the findings in Korea are that the simulated stable matchings look different than the population matchings; they are less assortative on some dimensions (such as employment in the same industry).

The paper suggests that some aspects of Korean marriage data therefore reflect choice constraints on who meets whom, and that as these constraints are relaxed (perhaps by increased use of internet matchmaking), some aspects of Korean life may change.

Market design update (5/12/09): Professor Lee sends me the following email describing how her work has proved useful in the design of the matching site, which uses an algorithm to suggest several possible dates to each participant:
"FYI, the matchmaking company partially adopted my estimates to adjust its matching algorithm. Previously, it assumed all men and all women have the same preference ranking. Under the revised algorithm, it classifies men and women based on their characteristics and allows them to have heterogeneous preference rankings (which I find in my estimation).
With the revised algorithm, the company was able to increase the probability of a proposal turning into an actual first date by a factor of 2. "

Marriage and dating online

Günter J. Hitsch, Ali Hortaçsu, and Dan Ariely have a paper about online dating and matching forthcoming in the AER: Matching and Sorting in Online Dating.

They write
"Using a novel data set from an online dating site, we first estimate mate preferences and then use the classic Gale-Shapley algorithm to predict matching outcomes. Online dating exists to facilitate the search for a partner. Our results suggest that the particular site that we study leads to approximately efficient matching outcomes (within the set of stable matches), and that search frictions are mostly absent. Hence, the site appears to be efficiently designed."

Their dataset allows them to look at all the clicks and messages of a subset of participants. So they can see which profiles people look at, and whom they choose to contact. This allows them to form estimates about preferences (on the assumption that if you browse two profiles and contact one of them, you prefer the one you contacted.) And they can observe when email addresses or phone numbers are mutually exchanged, which gives them their proxy for matches.

They compare the matchings they see both to marriages in the population at large (from Census data), and to stable matchings obtained by running the deferred acceptance algorithm, using the estimated preferences. They write:
"We saw that both actual marriages and the predicted matches from the Gale-Shapley model exhibit strong intra-ethnicity sorting patterns. However, even in the absence of search frictions it is not obvious whether same-race preferences alone cause sorting within ethnicity groups: because other attributes, such as income and education, are correlated with race, preferences over these other attributes could lead to intra-ethnicity sorting as well. To investigate what fraction of the predicted endogamy patterns is driven by same-race preferences, we remove these preferences from the utility specification and simulate the corresponding stable matches. Tables 10 and 11, panel (IV), show that intra-ethnicity sorting is strongly diminished, although small degrees of endogamy remain. These results suggest that racial sorting is mostly due to the same-race preferences; preferences for non-race attributes can not quantitatively account for the small fraction of marriages across different ethnic groups."

Market for sabbatical homes

Professors and some other kinds of teachers have periodic leaves, for a semester or an academic year, that don't match well with the usual rental real estate market, in which leases tend to be for a calendar year. This opens up a niche for a specialized rental market for sabbatical homes.

A professor with an upcoming leave might look to such a market both to rent his or her own home while on leave, and to rent a home where he will be spending his leave. Since other professors are the people most likely to want to rent (in either direction) for a corresponding time period, this opens up the possibility of a dedicated marketplace in which participants in this small slice of the large real estate market can efficiently find each other. (Such a marketplace may also serve to thicken the market for people with taste for the kinds of homes that professors live in, and may make it easier for owners to verify details about potential renters that make them more comfortable to temporarily rent their homes.)

When I searched on the web (under "sabbatical homes"), I found the following contenders for a share of this market, all of which appear to operate as simple listing services (i.e. they post ads, and people can then contact each other).

SabbaticalHomes.com, WanderingEducators.com , AcademicHomes.com

Update (on the market for goat rentals, as a lawn mowing substitute): This post elicited the following email from Mary O'Keeffe:

"Your post on the sabbatical rental market brought back memories of a year my husband and I spent a couple terms as visiting assistant professors at Caltech in 1981 and rented an incredibly nice luxury Pasadena townhouse from a senior professor who was on leave during the same two terms that year. We got a great below-market price and he got responsible tenants whose schedules aligned with his needs.

Anyway, I thought you might be interested in this article about the developing goat rental market in Silicon Valley:

http://www.webpronews.com/topnews/2009/05/01/google-and-yahoo-both-use-goats-for-lawn-mowing"

Real money trading in Massively Multiplayer Online Games

Want to know the current price of gold? Check out http://www.mysupersales.com/. You won't find the traditional store of value there, but rather the virtual gold used in massively multiplayer online games like World of Warcraft. You could earn gold by playing the game, and use the gold you earned in the game to buy equipment "in-game". But you can also buy gold from "gold farmers," in China and elsewhere, using real money, and having the gold delivered to you inside the game. Here's a paper by Richard Heeks of Manchester that says it's a surprisingly big business: "It employs hundreds of thousands of people and earns hundreds of millions of dollars annually. "

Real money trading for online gold also involves a set of transactions that some gamers and game operators find repugnant: operators go to great lengths to stop it. Here's a statement against the practice by the proprietors of World of Warcraft. And an article at a gamer site begins
"Is gold selling like pornography: something more of us do than admit? A shameful secret, something indulged alone and at night, in front of the screen; or during a lunchbreak, safely away from a partner, when a quick credit card or PayPal transaction will go unnoticed by others in-game?"

A further article recounts how some game operators have tried changing the rules on in-game transactions to make real money purchases less practical, while other games have decided to allow players to enter for free, and finance the game by officially selling equipment for real money:

"The most probable trend is that the games become 'free-to-play', and the operators sell gold or other in-game items by themselves. There are a lot of so-called F2P MMOs, and they mainly get revenue from selling in-game items.
"One of the most famous examples is a Chinese online game developer and operator - Giant Interactive Group, they got listed in the NASDAQ by selling in-game items in ZhengTu, a game they developed and published in China. So I don't think the game publishers will be willing to share the cake with the gold sellers.
...
"According to Vili Lehdonvirta of the Helsinki Institute for Information Technology, an expert on virtual consumerism, real money trading is now well-established outside of the MMO sphere.
"Several Korean online games successfully sell performance-based items to users," he says in his recent report Virtual item sales as a revenue model: identifying attributes that drive purchase decisions. "

HT: Rich Dougherty (who describes himself as an avid reader of Market Design).

Market for online music

The Digital Media Association announces a new agreement on how to pay royalties for music that is heard but not saved.