When Reputation Meets Subsidy: How to Build High Quality On Demand Service Platforms

A widely adopted approach to guarantee high-quality services on on-demand service platforms is to introduce a reputation system, where good reputation workers will receive a bonus for providing high-quality services. In this paper, we propose a general reputation framework motivated by various practical examples. Our model captures the evolution of a reputation system, jointly considering worker's strategic behaviors and imperfect customer reviews that are usually studied separately before. We characterize the stationary equilibrium of the market, in particular, the existence and uniqueness of a non-trivial equilibrium that ensures high-quality services. Furthermore, we propose an efficient subsidization mechanism that helps induce high-quality services on the platform, and show the market convergence to the high service quality equilibrium under such a mechanism.