The Good, the Bad, or the Ugly? An Empirical Investigation of Revoking Behavior on Ebay
38 Pages Posted: 24 Aug 2010 Last revised: 13 Oct 2015
Date Written: August 18, 2010
Abstract
This study investigates a crucial aspect of the reputation mechanism design in electronic markets – the ability of buyers and sellers to revoke or mutually withdraw negative feedback and ratings. Based on an analysis of recent changes in eBay’s feedback mechanism design, we find that the two-way reputation system enables certain sellers to behave opportunistically by revoking negative feedbacks they receive. This makes the reputation system less effective in discerning the quality of sellers. We also find that changes in the reputation system have a significant influence on these sellers’ behaviors. After eBay’s ban on revoking, sellers exert more effort to improve the quality of their transactions. Our findings support the moral hazard assumption regarding seller’s strategic behavior. We discuss the implications of the above findings for reputation mechanism design and practice.
Keywords: mechanism design, reputation mechanisms, revoking, online auctions, moral hazard
Suggested Citation: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
Recommended Papers
-
Economic Insights from Internet Auctions: A Survey
By Patrick Bajari and Ali Hortacsu
-
By Sulin Ba and Paul A. Pavlou
-
By Paul A. Pavlou and Sulin Ba
-
The Value of Reputation on Ebay: A Controlled Experiment
By Paul Resnick, Richard J. Zeckhauser, ...
-
The Dynamics of Seller Reputation: Theory and Evidence from Ebay
By Luis M. B. Cabral and Ali Hortacsu
-
The Dynamics of Seller Reputation: Theory and Evidence from Ebay
By Luis M. B. Cabral and Ali Hortacsu