The Value of Feedback: An Analysis of Reputation System

Posted: 14 Oct 2014

See all articles by Maryam Saeedi

Maryam Saeedi

Carnegie Mellon University - David A. Tepper School of Business

Zeqian Shen

eBay Research Labs

Neel Sundaresan

eBay Research Labs

Date Written: October 14, 2014

Abstract

Online markets, as established by many authors, are prone to asymmetric information problems. Despite this observation, many online markets have thrived and grown over time primarily due to user experience rating systems, also known as reputation systems. In this paper, we analyze how such systems work, and specifically we turn our focus on eBay. We start by analyzing the Feedback behavior of buyers and sellers over time. We use a key policy change, that sellers can no longer leave negative Feedback for buyers, as an identifier. Our data analysis points to the existence of retaliation among buyers and sellers before the policy change. Furthermore, we develop a model of Feedback behavior as a dynamic game between buyers and sellers and structurally estimate the model. The structural estimation further establishes the existence of retaliation incentives between buyers and sellers.

Keywords: eBay, Reputation, Retaliation, Moral Hazard, Adverse Selection

Suggested Citation

Saeedi, Maryam and Shen, Zeqian and Sundaresan, Neel, The Value of Feedback: An Analysis of Reputation System (October 14, 2014). Available at SSRN: https://ssrn.com/abstract=2510090

Maryam Saeedi (Contact Author)

Carnegie Mellon University - David A. Tepper School of Business ( email )

5000 Forbes Avenue
Pittsburgh, PA 15213-3890
United States

Zeqian Shen

eBay Research Labs ( email )

2065 Hamilton Avenue
San Jose, CA
United States

Neel Sundaresan

eBay Research Labs ( email )

2065 Hamilton Avenue
San Jose, CA
United States

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