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

Shun Ye

George Mason University

Guodong (Gordon) Gao

University of Maryland - R.H. Smith School of Business

Siva Viswanathan

University of Maryland - Robert H. Smith School of Business

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

Ye, Shun and Gao, Guodong (Gordon) and Viswanathan, Siva, The Good, the Bad, or the Ugly? An Empirical Investigation of Revoking Behavior on Ebay (August 18, 2010). An updated version of this paper has been published in MIS Quarterly: Shun Ye, Guodong Gao, and Siva Viswanathan. 2014. "Strategic Behavior in Online Reputation Systems: Evidence from Revoking on eBay," MIS Quarterly, (38: 4) pp.1033-1056.. Available at SSRN: https://ssrn.com/abstract=1664822 or http://dx.doi.org/10.2139/ssrn.1664822

Shun Ye

George Mason University ( email )

4400 University Drive
Fairfax, VA 22030
United States

Guodong (Gordon) Gao (Contact Author)

University of Maryland - R.H. Smith School of Business ( email )

4325 Van Munching Hall
College Park, MD 20742
United States

HOME PAGE: http://www.rhsmith.umd.edu/faculty/ggao/

Siva Viswanathan

University of Maryland - Robert H. Smith School of Business ( email )

College Park, MD 20742-1815
United States

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