Brown Bag Seminar Industrial Economics

Advertising on e-commerce platforms, which enables third-party sellers to place their products as sponsored listings within organic results, is a widespread phenomenon, creating large revenues for online marketplaces. While economic theory suggests that advertising can serve as a signal for product quality, the empirical evidence is ambiguous. In this project, I collect data from a leading online labor market platform to analyze whether a sponsored bid improves a freelancer’s chance of getting hired for a project. Controlling for the position of sponsored bids and using a control function approach, I find heterogeneous effects depending on the type of project applied for. Preliminary results indicate positive effects in the context of “high-skill” jobs and insignificant effects for “low-skill” jobs. I argue that different degrees of information asymmetry could be a possible mechanism explaining these results.