The Dynamics of Seller Reputation: Evidence from Ebay

51 Pages Posted: 13 Oct 2008

See all articles by Luis M. B. Cabral

Luis M. B. Cabral

New York University (NYU) - Leonard N. Stern School of Business - Department of Economics; Centre for Economic Policy Research (CEPR)

Ali Hortacsu

University of Chicago - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: March 2006

Abstract

We construct a panel of eBay seller histories and examine the importance of eBay s reputation mechanism. We find that, when a seller first receives negative feedback, his weekly sales rate drops from a positive7% to a negative 7%; subsequent negative feedback ratings arrive 25% more rapidly than the first one and don t have nearly as muchimpact as the first one. We also find that a seller is more likely to exit the lower his reputation is; and that, just before exiting, sellers receive more negative feedback than their lifetime average.We consider a series of theoretical models and measure them against these empirical results. Regardless of which theoretical model best explains the data, an important conclusion of our paper is that eBay sreputation system gives way to noticeable strategic responses from both buyers and sellers.

Keywords: quality, reputation, auctions, eBay

Suggested Citation

Cabral, Luis M. B. and Hortacsu, Ali, The Dynamics of Seller Reputation: Evidence from Ebay (March 2006). NYU Working Paper No. EC-06-32. Available at SSRN: https://ssrn.com/abstract=1282525

Luis M. B. Cabral

New York University (NYU) - Leonard N. Stern School of Business - Department of Economics ( email )

269 Mercer Street
New York, NY 10003
United States
212-998-0858 (Phone)
212-998-4218 (Fax)

HOME PAGE: http://www.stern.nyu.edu/~lcabral

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Ali Hortacsu

University of Chicago - Department of Economics ( email )

1126 East 59th Street
Chicago, IL 60637
United States
773-702-5841 (Phone)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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