Crowd-judging on Two-sided Platforms: An Analysis of In-group Bias

Internal seminar for researchers

Abstract: Disputes over transactions on two-sided platforms are common and usually arbitrated through platforms’ customer service departments or third-party service providers. This paper studies crowd-judging, a novel crowd-sourcing mechanism whereby users (buyers and sellers) volunteer as jurors to decide disputes arising from the platform. Using a rich dataset from the dispute resolution center at Taobao, a leading Chinese e-commerce platform, we aim to understand this innovation and propose and analyze potential operational improvements, with a focus on in-group bias (buyer jurors favor the buyer, likewise for sellers). Platform users, especially sellers, share the perception that in-group bias is prevalent and systematically sways case outcomes as the majority of users on such platforms are buyers, undermining the legitimacy of crowd-judging. Our empirical findings suggest that such concern is not completely unfounded: on average, a seller juror is approximately 10% likelier (than a buyer juror) to vote for a seller. Such bias is aggravated among cases that are decided by a thin margin, and when jurors perceive that their in-group's interests are threatened. However, the bias diminishes as jurors gain experience: a user's bias reduces by nearly 95% as their experience grows from zero to the sample-median level. Incorporating these findings and juror participation dynamics in a simulation study, the paper delivers three managerial insights. First, under the existing voting policy, in-group bias influences the outcomes of no more than 2% of cases. Second, simply increasing crowd size, either through a larger case panel or aggressively recruiting new jurors, may not be efficient in reducing the adverse effect of in-group bias. Finally, policies that allocate cases dynamically could simultaneously mitigate the impact of in-group bias and nurture a more sustainable juror pool.