Can 'Gold Medal' Sellers Earn Gold? The Impact of Short-Term Reputation on Product Sales

Posted: 22 Aug 2017 Last revised: 10 Jan 2018

See all articles by Hsing Kenneth Cheng

Hsing Kenneth Cheng

University of Florida - Warrington College of Business

Weiguo Fan

Virginia Polytechnic Institute & State University - Department of Accounting and Information Systems

Peipei Guo

Shanghai University of Finance and Economics - School of Information Management and Engineering

Hailiang Huang

Shanghai University of Finance and Economics

Liangfei Qiu

University of Florida - Warrington College of Business Administration

Date Written: August 7, 2017

Abstract

Reputation system has been an important component of improving online markets’ efficiency by reducing uncertainty about the quality of the sellers. Most, if not all, reputation systems examined in the extant literature reflect the sellers’ long-term accumulative reputation, which has several drawbacks that impede accomplishing the intended goals of the reputation systems. Taobao.com, the largest consumer-to-consumer online market in China, implemented the Gold Medal Seller (GMS) program as a concurrent reputation mechanism to enhance its existing long-term accumulative reputation system. The GMS program presents a backdrop that allows us to address several intriguing research issues not empirically examined in prior literature. We derive several significant and useful findings. Specifically, we find that earning a GMS badge has a positive impact on product sales, and the effect becomes stronger the larger the number of consecutive attainments of receiving the GMS. The GMS and sellers’ long-term accumulative reputation have a substitutive effect on product sales, and this substitutive effect is stronger for sellers with below average long-term accumulative reputation. Moreover, earning the GMS increases the effectiveness of product word-of-mouth in terms of amplifying the positive impact of the volume of reviews and diminishing the harmful effect of negative reviews.

Keywords: Reputation System, Online Markets, Product Uncertainty, Seller Uncertainty, Word of Mouth

JEL Classification: M10, M15

Suggested Citation

Cheng, Hsing Kenneth and Fan, Weiguo and Guo, Peipei and Huang, Hailiang and Qiu, Liangfei, Can 'Gold Medal' Sellers Earn Gold? The Impact of Short-Term Reputation on Product Sales (August 7, 2017). Available at SSRN: https://ssrn.com/abstract=3019930

Hsing Kenneth Cheng (Contact Author)

University of Florida - Warrington College of Business ( email )

P.O. Box 117169
Gainesville, FL 32611-7169
United States
352-392-7068 (Phone)
352-392-5438 (Fax)

Weiguo Fan

Virginia Polytechnic Institute & State University - Department of Accounting and Information Systems ( email )

Pamplin College of Business
3007 Pamplin Hall
Blacksburg, VA 24061
United States
540-231-6588 (Phone)

HOME PAGE: http://www.cob.vt.edu/acis/faculty/wfan/

Peipei Guo

Shanghai University of Finance and Economics - School of Information Management and Engineering ( email )

No. 100 Wudong Road
Shanghai, Shanghai 200433
China

Hailiang Huang

Shanghai University of Finance and Economics ( email )

777 Guoding Road
Shanghai, AK Shanghai 200433
China

Liangfei Qiu

University of Florida - Warrington College of Business Administration ( email )

Gainesville, FL 32611
United States

HOME PAGE: http://sites.google.com/site/qiuliangfei/

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