Reputation and Regulations: Evidence from eBay

Reputation and Regulations: Evidence from eBay

0.00 Avg rating0 Votes
Article ID: iaor20165124
Volume: 62
Issue: 12
Start Page Number: 3604
End Page Number: 3616
Publication Date: Dec 2016
Journal: Management Science
Authors: , , ,
Keywords: internet, marketing, behaviour
Abstract:

To mitigate inefficiencies arising from asymmetric information, some markets rely on government interventions, whereas others rely on reputation systems, warranties, or guarantees. This paper explores the impact of two mechanisms, namely, reputation badges and buyer protection programs, and their interaction on eBay’s marketplace. Adding buyer protection reduces the premium for the reputation badge and increases efficiency in the marketplace. These efficiency gains are achieved by reducing moral hazard through an increase in sellers' quality and by reducing adverse selection through a higher exit rate for low‐quality sellers. Our estimates suggest buyer protection increases the total welfare by 2.9%. This paper was accepted by Matt Shum, marketing.

Reviews

Required fields are marked *. Your email address will not be published.