Abstract
Online labor markets become increasingly important in creating jobs for millions of online freelancers around the globe. However, 60% of projects fail to reach to a contract, indicating a waste of time and effort for both buyers and freelancers. Given the fact that a buyer is often uncertain about the price (common value) of a project, this paper empirically examines how this uncertainty on common value—measured as bids price dispersion--affects buyer’s contract decisions. We find bids price dispersion has a negative effect on buyer’s contract decisions. And this effect becomes smaller as a project receives more bids. The paper contributes to online labor market literature by focusing on buyer’s uncertainty over common value and proposing the importance of bids price dispersion in buyers’ contract decisions. Managerial implications for the platform and freelancers’ bidding strategies under common value uncertainty are discussed .