Managing Market Mechanism Transitions: A Randomized Trial of Decentralized Pricing Versus Platform Control

We report on a randomized trial conducted during a market design transition on a sharing economy platform, where providers who formerly set rental prices for their assets were randomly assigned to groups with varying levels of pricing control. Even when faced with the prospect of significantly higher revenues, providers retaliate against the centralization of pricing by exiting the platform, reducing asset availability and cancelling transactions. Allowing providers to retain partial control lowers retaliation substantially even though providers do not frequently utilize this additional flexibility. We discuss information asymmetry, divergent incentives, and psychological contract violation as alternative explanations for our results.