Determinants of reverse auction results: an empirical examination of freelancer.com

In recent years, auction mechanisms have been widely implemented in online platforms, leading to the advent of reverse auctions sites on which people can offer smalland medium-sized projects such as craft or information technology (IT) projects. These sites are especially interesting for freelancers who can bid for a particular project. The principal offering the project can make a decision based on the bid amount as well as on other information available about the freelancers. In this paper, we derive factors from transaction cost theory that explain the decision of a principal besides the bid amount. Based on an empirical analysis of bidding information extracted from Freelancer.com, we found that the bid amount has the highest effect on the decision of the principal followed by the number of reviews the freelancer has already received and the number of already conducted transactions between a freelancer and a principal. We also found that principals prefer freelancers who live in the same cultural area. Furthermore our results indicate that a gold membership has no effect on the decision of the principal which is of interest especially for those freelancers who believe they are considered to be more reliable as a gold member.