Entrepreneurs on the Darknet: Reaction to Negative Feedback

36 Pages Posted: 3 Sep 2018

See all articles by Michail Batikas

Michail Batikas

Ludwig Maximilian University of Munich - Faculty of Business Administration (Munich School of Management)

Tobias Kretschmer

Ludwig Maximilian University of Munich - Faculty of Business Administration (Munich School of Management); Centre for Economic Policy Research (CEPR)

Date Written: August 08, 2018

Abstract

Reputation is one of the key assets of a digital entrepreneur in markets for experience goods, especially in settings like Darknet and anonymous marketplaces. But what happens if this asset is diminished by a shock, i.e. negative feedback? We study how entrepreneurs on anonymous marketplaces respond to negative feedback by adjusting their product portfolio, or even exiting the market altogether. We find that the entrepreneurs are more likely to exit following negative feedback, but that a entrepreneur’s accumulated transactions experience on the market platform negatively moderates this. Interestingly, the entrepreneurs that do remain tend to expand their product portfolio. This effect, however, is again driven by entrepreneurs with relative high transactions experience, i.e. those with a high prior transactions volume. These results suggest that the reputation and the transactions experience of an entrepreneur interact in intricate ways to drive an entrepreneur’s choice of remaining in the market or adjusting her portfolio. We derive managerial and policy implications of these results.

Keywords: Digital Entrepreneurship, Reputation, Anonymous Marketplaces, Illicit Drugs, Darknet

Suggested Citation

Batikas, Michail and Kretschmer, Tobias, Entrepreneurs on the Darknet: Reaction to Negative Feedback (August 08, 2018). Available at SSRN: https://ssrn.com/abstract=3238141 or http://dx.doi.org/10.2139/ssrn.3238141

Michail Batikas (Contact Author)

Ludwig Maximilian University of Munich - Faculty of Business Administration (Munich School of Management) ( email )

Kaulbachstr. 45
Munich, 80539
Germany

Tobias Kretschmer

Ludwig Maximilian University of Munich - Faculty of Business Administration (Munich School of Management) ( email )

Kaulbachstr. 45
Munich, 80539
Germany

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

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