Why isn’t Uber a worker cooperative? On the (im)possibility of self-management in the platform economy

Summary

We develop a simple model of a worker-managed (WM) via-app labour platform firm, through which a homogenous service is provided to customers on-demand, with the costs of organizing and monitoring the workers being constant across different sizes of the business. We show that WM platforms may be viable when the initial cost of the platform and the cost of external capital for financially constrained workers are lower and in environments characterized by high revenues and positive network externalities. Moreover, when capital-managed (CM) platform owners retain an overhead commission below a certain critical threshold, workers are better off as employees in a CM firm. These findings are shown to fit available anecdotal evidence revealing that WM platforms are confined to activities related to on-line trade of ethical goods and artistic products, where demand bunching effects matter significantly. On the other side, where network effects are milder and overhead commissions are set strategically by CM firms, as in the peer-to-peer transportation sector, WM via-app platforms are virtually absent.