How Bonus Strategies Shape the Gig Economy and Why They Don’t Always Work as Intended

Businesses built on gig workers—whether ride-sharing, home-repair platforms, delivery apps, or online freelancing marketplaces—rely heavily on people they don’t directly employ or control. Because these workers can sign up for multiple platforms and choose when or whether to work, companies often introduce incentives to keep them active. One of the most common tools is bonuses. But new Cornell-led research shows that bonuses can be a double-edged sword, sometimes helping platforms and sometimes hurting them, depending on how the incentives are designed and how crowded the labor market is.

This study, published in the journal Production and Operations Management, takes a clear, analytical look at how two types of bonuses—fixed bonuses and contingent bonuses—affect platforms, workers, and overall efficiency. The findings are surprisingly nuanced and challenge the assumption that offering more bonuses automatically leads to more stable, satisfied gig workers.

Below is a straightforward breakdown of the key details from the research, along with additional context about the gig-economy landscape to help readers better understand the implications.

Understanding the Two Types of Bonuses

The research focuses on two distinct incentive types:

Fixed bonuses: These are also called subsidies. They’re given upfront as part of the standard contract, and workers receive them simply for being available or signing up.
Contingent bonuses: These are only paid after a worker maintains consistent participation for a certain period. They’re designed to boost long-term loyalty and reduce turnover.

Both methods are widely used by gig platforms. A few years ago, ride-sharing companies such as Uber and Lyft began aggressively offering bonuses to attract drivers. However, around the same time, Uber began reporting significant losses, raising concerns that the company was spending heavily on incentives that didn’t necessarily improve operational stability. This motivated researchers—including scholars from Cornell University, Renmin University in Beijing, and Santa Clara University—to dig deeper into the economic mechanisms behind these strategies.

What Happens When Gig Workers Are Plentiful

One of the clearest findings from the study is that fixed bonuses work best when there are many available workers.

In a “thick” labor market with plenty of gig workers, platforms do not need to fight over worker supply. A fixed bonus becomes a way for platforms to pay workers in a more flexible and potentially cheaper way. Because platforms can choose to reduce commission payouts and instead use fixed bonuses strategically, they gain more control over total labor costs.

This also reduces what economists refer to as a prisoner’s dilemma scenario: a situation where companies feel pressured to continually outbid each other with higher pay or incentives just to hold onto the workers they already have. Fixed bonuses create stability by giving each platform a more predictable pool of contractors.

But the downside is significant. Even though platforms benefit, workers tend to earn less overall in this arrangement. Since platforms now have multiple methods to keep labor costs down, pay structures can shift in ways that reduce worker income.

From a broader perspective, society also loses because lower worker pay and less competition can lead to misallocation of labor and reduced service quality.

What Happens When Workers Are Scarce

The dynamics change dramatically when the labor market tightens. When workers are limited, contingent bonuses outperform fixed bonuses.

In a tight market, platforms must compete harder to attract and retain workers. Contingent bonuses give workers a reason to stick around because the bonus only becomes available after consistent service. This encourages longer-term commitment, which is valuable for platforms that need predictable staffing to meet customer demand.

However, contingent bonuses revive the prisoner’s dilemma problem. Platforms may end up overpaying or continuously increasing incentives to remain competitive. This inflates costs and erodes profits.

Contingent bonuses also produce a subtle operational issue: they reduce demand-matching efficiency, meaning the quality of service suffers. Workers sometimes accept less-desirable jobs—not because they want to, but because they need to hit bonus requirements. For example, a driver may accept a ride 10 minutes away, even if a 5-minute pickup could appear soon, simply to maintain bonus-eligible activity.

This creates incentive-driven friction that reduces efficiency across the platform and harms social welfare by misaligning workers with customer needs.

Why Gig Platforms Turn to Bonuses in the First Place

The rising reliance on bonuses is closely tied to how gig platforms operate. Unlike traditional employers, these companies must navigate:

Uncertain worker availability
Multi-homing, where workers use several platforms simultaneously
Fluctuating demand, often within hours or days
No employee-employer obligation, since most gig workers are independent contractors

For example, a worker may be registered with both Uber and Lyft. If one platform offers better bonuses or more attractive jobs that day, the worker can instantly switch. This makes incentives an appealing tool for platforms to encourage loyalty in a system where loyalty is not expected or required.

The problem, as this research highlights, is that bonuses do not always create sustainable stability.

A Quick Look at the Game-Theory Approach Behind the Study

To analyze these strategies, the researchers developed a game-theory model that simulates realistic conditions under which platforms compete. The model incorporates:

How platforms set commissions and bonuses
How workers choose between platforms
How supply-demand imbalances shape competition
Multi-period decision-making (required for contingent bonuses)
Free choice of workers, who can switch platforms at any time
Competition effects when both companies use similar incentive tools

The study compares scenarios with and without bonuses and examines the ripple effects across profit, worker pay, and service efficiency.

This theoretical approach captures the complex trade-offs gig platforms face and provides insights that align well with real-world observations from the last decade.

The Bigger Picture: The Gig Economy’s Growing Influence

The context behind the research is just as important. The gig workforce is expanding rapidly:

Gig workers made up around 42% of the U.S. workforce in 2022.
That number is expected to exceed 50% by 2028.

This means bonuses and compensation strategies aren’t just internal business decisions—they affect millions of workers and influence a major segment of the economy.

Gig work has clear upsides:

Workers enjoy flexibility instead of strict schedules.
Businesses save costs due to no benefits, no health insurance, and no long-term employment obligations.

But the trade-offs are becoming increasingly apparent:

Workers face pay volatility and unstable income.
Platforms struggle to predict worker availability.
Customer experience can fluctuate based on labor supply.
Incentives can distort behavior, leading to lower efficiency.

This new research contributes to the ongoing debate about how gig workers should be compensated and how platforms should structure incentives in ways that do not unintentionally harm overall system performance.

Why This Matters for Policy, Platforms, and Workers

The study suggests several important implications:

Platforms need to tailor bonus strategies based on real-time labor conditions, not rely on universal approaches.
Workers should understand that bonuses can mask lower base pay, especially under fixed-bonus systems.
Policymakers may need to examine bonus structures when discussing gig-worker protections, since incentives can reshape income in unexpected ways.
Operational inefficiencies created by contingent bonuses could justify regulatory intervention if they significantly hurt service quality or worker welfare.

As the gig economy continues to grow, compensation structures will remain one of the most critical—and most debated—components of how platforms function.

Research Paper:
Bonus Competition in the Gig Economy (2025)
https://doi.org/10.1177/10591478251389408