Designing Quality Certificates: Insights from Ebay

43 Pages Posted: 24 Jan 2022 Last revised: 30 Jan 2025

See all articles by Xiang Hui

Xiang Hui

Washington University in St. Louis

Ginger Zhe Jin

University of Maryland - Department of Economics; National Bureau of Economic Research (NBER)

Meng Liu

Washington University in St. Louis

Date Written: January 2022

Abstract

Quality certification is a common tool to reduce asymmetric information and enhance trust in marketplaces. Should the certificate focus on seller inputs such as fast shipping, or include output measures such as consumer ratings? In theory, incorporating output measures makes the certificate more relevant for consumer experience, but doing so may discourage seller effort because outputs can be driven by random factors out of seller control. To understand this tradeoff, we study a major redesign of eBay's Top Rated Seller (eTRS) program in 2016, which removed most consumer reports from the eTRS criteria and added direct measures of seller inputs. This change generates immediate selection on certified sellers, and homogenizes the share of certified sellers across product categories of different criticalness in consumer ratings. Post the regime change, sellers improve in the input measures highlighted in the new certificate. These effects are more conspicuous in categories that had less critical consumer ratings, in part because the new algorithm automatically removes the potential negative bias for sellers in critical markets and a clearer threshold motivates sellers to just reach the threshold. The new regime also makes sales more concentrated towards large sellers, especially in the categories that face more critical consumers.

Suggested Citation

Hui, Xiang and Jin, Ginger Zhe and Liu, Meng, Designing Quality Certificates: Insights from Ebay (January 2022). NBER Working Paper No. w29674, Available at SSRN: https://ssrn.com/abstract=4016075

Xiang Hui (Contact Author)

Washington University in St. Louis ( email )

Ginger Zhe Jin

University of Maryland - Department of Economics ( email )

College Park, MD 20742
United States
301-405-3484 (Phone)
301-405-3542 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Meng Liu

Washington University in St. Louis ( email )

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