Aparajita Agarwal, Phd Candidate, The Wharton School; Tyler Wry, Management, The Wharton School
Abstract: This study examines how local agents – intermediaries that connect firms such as digital platforms to last mile customers – respond to increased value capture by the firm and the heterogeneity in their responses to different customer segments. Utilizing a proprietary dataset of over 400,000 transactions on a digital platform in rural India I examine how agents, pivotal in bridging infrastructure and capability gaps, react to incentive changes. I find that agents responses are heavily influenced by their social ties and community relationships, such that post the policy change by the firm, agents transact even less with customers from their social group, and those with whom they had pre-existing ties. Moreover, their negative response is attenuated in socially heterogenous communities. Hence, Agent embeddedness can constrain a platform and even reduce overall value when the platform’s efforts to capture more value intensifies agents’ trade-offs. The study contributes to the literature on intermediation in developing contexts, highlighting the strategic importance of agents and the social fabric in formulating digital platform strategies.