Reputation in an Internet Auction Market

33 Pages Posted: 21 Mar 2000

See all articles by Cynthia G. McDonald

Cynthia G. McDonald

University of Missouri at Columbia - Department of Finance

V. Carlos Slawson, Jr.

Louisiana State University

Abstract

We investigate how seller reputation affects bidding activity in an Internet auction market. We find that bidders reward higher reputation sellers with higher prices. Sellers have incentive to invest in reputation despite noise due to the ability of participants to shed reputations using cheap pseudonyms and disincentives to report negative outcomes. The market thrives in spite of unobservable products and relatively high contract enforcement costs. The specific feedback of participants suggests that high seller reputation signals preferred traits including delivery efficiency, product description accuracy, advertised service accuracy, and post-auction communication. Overall, the data provide empirical support suggesting that the reputation measure and accompanying feedback align the interests of buyers with economically motivated sellers.

JEL Classification: D44, L14

Suggested Citation

McDonald, Cynthia G. and Slawson, Jr., V. Carlos, Reputation in an Internet Auction Market. Available at SSRN: https://ssrn.com/abstract=207448 or http://dx.doi.org/10.2139/ssrn.207448

Cynthia G. McDonald (Contact Author)

University of Missouri at Columbia - Department of Finance ( email )

120 Middlebush Hall
Columbia, MO 65211
United States
(573) 882-0638 (Phone)
(573) 884-6296 (Fax)

V. Carlos Slawson, Jr.

Louisiana State University ( email )

E. J. Ourso College of Business
Department of Finance
Baton Rouge, LA 70803-6308
United States
225-578-6291 (Phone)

HOME PAGE: http://www.lsu.edu/business/finance/profile-viewer.php?un=cslawson

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