Markets, Trust and Cultural Biases: Evidence from eBay

28 Pages Posted: 31 Jul 2012 Last revised: 8 Nov 2017

See all articles by Ricardo Perez-Truglia

Ricardo Perez-Truglia

University of California, Berkeley; National Bureau of Economic Research (NBER)

Date Written: August 1, 2017

Abstract

A body of research argues that cultural biases in trust may be responsible for economic backwardness. This paper studies the role of cultural biases in a real-world market, eBay, with well-designed features intended to facilitate cooperation. We analyze the buyer’s decision to leave negative feedback as an act of mistrust towards the seller. To identify the effects of buyer characteristics on feedback choices, we exploit an identification strategy that leverages high-volume data from millions of transactions. We find that negative feedback decreases as buyers gain experience on the market. Also, we show that measures of pro-social beliefs and behavior do not explain feedback choices. Our favorite interpretation is that cultural biases in trust may have limited importance in markets with effective reputation-building mechanisms.

Keywords: markets, reputation, culture, social capital, trust, institutions

JEL Classification: D63, D80, L86, Z10

Suggested Citation

Perez-Truglia, Ricardo, Markets, Trust and Cultural Biases: Evidence from eBay (August 1, 2017). Available at SSRN: https://ssrn.com/abstract=2120696 or http://dx.doi.org/10.2139/ssrn.2120696

Ricardo Perez-Truglia (Contact Author)

University of California, Berkeley ( email )

310 Barrows Hall
Berkeley, CA 94720
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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