Experience Markets: an Application to Outsourcing and Hiring

Abstract: Trying out a market often allows new buyers to learn about the distribution of products or services available. We study how hiring varies with employer experience in an online labor market platform where employers contract with remote workers. Experience affects employer selection into posting further jobs, increases the perceived value of using the market, and alters how employers evaluate individual workers. These changes in demand for workers are consistent with experience reducing employer uncertainty about the distribution of applicants. Job applicants respond with higher wage bids to new employers. We evaluate policies that encourage employer learning about individual market fit.