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Faculty & Research


Platform Governance and the Rural‐Urban Divide: Sellers’ Responses to Design Change

Journal Article
Research Summary: Platform companies use design changes to govern their sellers. The success of a design change depends on sellers’ responses, which are influenced by sellers’ local environments. The authors' study focuses on an important aspect of the local environment - rural versus urban. Using data from a leading e‐commerce platform, the authors find that relative to urban sellers, rural sellers were particularly poor at adjusting to a major design change, resulting in a persistent performance gap. The authors attribute these misaligned responses to rural sellers’ lack of local access to rich information. This study shows that sellers’ local heterogeneity generates equivocal responses and carries unintended consequences for platform governance. It also enriches our understanding of digital inequality and algorithmic design by highlighting the importance of the “offline interface”. Managerial Summary: Digital platforms frequently change their design rules (e.g., ranking algorithms) to guide the behavior of sellers. However, sellers are inherently heterogeneous, and sellers’ abilities to understand and follow a design change also vary across seller populations. This study examines a major design change on a leading e‐commerce platform. The authors find that, compared to urban sellers, rural sellers developed responses that detracted from the platform’s design goals and resulted in lower sales. This study highlights the need for digital platforms to understand how sellers’ offline environments affect their online behavior. This study also shapes the conversation on digital inequality: despite being connected online, entrepreneurs in traditionally disadvantaged regions may still suffer from a lack of accessible local information channels.