Abstract

Marketplaces such as online labor markets are often in a position to provide agents with public certified information to facilitate trade. I examine how employers on oDesk.com, the world’s largest online marketplace, use public information in hiring. By experimentally varying employers’ access to applicants’ past wage rates, I demonstrate that market provided cheap-to-observe signals of quality are used by employers as substitutes for costly search and screening. I show that when employers are searching for someone low skilled then the provision of coarse information from the market is sufficient and employers will not pay a cost to acquire more information. When employers are looking for someone high skilled theywill pay fixed screening costs to acquire information beyond what is provided by the platform. If the coarse information is not provided by the marketplace, then even employers looking for unskilled labor will pay to acquire more information. This leads to more matches and hiring quality workers at a lower price. However, the cost savings from identifying and hiring these low cost, but high quality workers does not outweigh the upfront cost of information acquisition.

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