PlumX Metrics
SSRN
Embed PlumX Metrics

The Dynamics of Seller Reputation: Theory and Evidence from Ebay

NBER Working Paper No. w10363
2004
  • 0
    Citations
  • 4,808
    Usage
  • 1
    Captures
  • 0
    Mentions
  • 0
    Social Media
Metric Options:   Counts1 Year3 Year

Metrics Details

  • Usage
    4,808
    • Abstract Views
      4,700
    • Downloads
      108
  • Captures
    1
    • Readers
      1
      • SSRN
        1
  • Ratings
    • Download Rank
      509,390

Paper Description

We propose a basic theoretical model of eBay's reputation mechanism, derive a series of implications and empirically test their validity. Our theoretical model features both adverse selection and moral hazard. We show that when a seller receives a negative rating for the first time his reputation decreases and so does his effort level. This implies a decline in sales and price; and an increase in the rate of arrival of subsequent negative feedback. Our model also suggests that sellers with worse records are more likely to exit (and possibly re-enter under a new identity), whereas better sellers have more to gain from buying a reputation' by building up a record of favorable feedback through purchases rather than sales. Our empirical evidence, based on a panel data set of seller feedback histories and cross-sectional data on transaction prices collected from eBay is broadly consistent with all of these predictions. An important conclusion of our results is that eBay's reputation system gives way to strategic responses from both buyers and sellers.

Bibliographic Details

Provide Feedback

Have ideas for a new metric? Would you like to see something else here?Let us know