Can 'Gold Medal' Sellers Earn Gold? The Impact of Short-Term Reputation on Product Sales
Posted: 22 Aug 2017 Last revised: 10 Jan 2018
Date Written: August 7, 2017
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: Suggested Citation