REPUTATION IN AN INTERNET AUCTION MARKET
Open accessAbstract
We investigate how market participants possessing varying degrees of anonymity reduce asymmetric information costs in an electronic auction market using a quantifiable measure of reputation. The data suggest that purchasers in this self‐enforcing market use reputation to price information asymmetries associated with counterparty risks. The results provide direct empirical evidence of an economic incentive for investing in reputation. The continually observable feedback of participants indicates that high seller reputation signals preferred traits, including advertised service accuracy, product description accuracy, delivery efficiency, and posttransaction communication. Despite some imperfections, the reputation measure represents clear differences in expected performance between high‐reputation and low‐reputation counterparties.
Integrity signals
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Each is checked against this paper’s own text: does it say what the citing paper says it does?
McDonald & Slawson's analysis implies that a one-point increase in reputation corresponds to a $0.04 increase in final price.
“For example, their analysis implies that a one-point increase in reputation corresponds to a $0.04 increase in final price.”
From Reputation and Feedback Systems in Online Platform Markets (2016) · cites this paper as McDonald & Slawson (2002)
McDonald & Slawson's statistically significant reputation effect is not economically meaningful.
“Second, although statistically significant, the results are not economically meaningful.”
From Reputation and Feedback Systems in Online Platform Markets (2016) · cites this paper as McDonald & Slawson (2002)
McDonald & Slawson (2002) found that eBay's reputation score is positively correlated with both the closing price and the number of bids.
“Their results suggest that eBay's reputation score is positively correlated with both the closing price and the number of bids.”
From Reputation and Feedback Systems in Online Platform Markets (2016) · cites this paper as McDonald & Slawson (2002)
Moving from no reputation to the median reputation score in McDonald & Slawson's sample increases price by less than $1, a negligible impact relative to a median price of $275.
“That the median reputation score of the sample is 21 points means that moving from no reputation at all to the median increases price by less than $1, a negligible impact when considering a median price of $275.”
From Reputation and Feedback Systems in Online Platform Markets (2016) · cites this paper as McDonald & Slawson (2002)
Studies using scraped data such as McDonald & Slawson (2002) face endogeneity because there is no random assignment.
“First is the problem of endogeneity, as there is no random assignment.”
From Reputation and Feedback Systems in Online Platform Markets (2016) · cites this paper as McDonald & Slawson (2002)
Cites
The Market for "Lemons": Quality Uncertainty and the Market Mechanism
Akerlof, G. A. (1970) · The Quarterly Journal of Economics · doi:10.2307/1879431 · Cited by 23,016 · see citing works
Flagged first, then by citations
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The value of reputation on eBay: A controlled experiment
Resnick, P., Zeckhauser, R., Swanson, J., & Lockwood, K. (2006) · Experimental Economics · doi:10.1007/s10683-006-4309-2 · Cited by 1,118 · see citing works
Reputation and Feedback Systems in Online Platform Markets
Tadelis, S. (2016) · Annual Review of Economics · doi:10.1146/annurev-economics-080315-015325 · Cited by 524 · see citing works
THE DYNAMICS OF SELLER REPUTATION: EVIDENCE FROM EBAY<sup>*</sup>
CABRAL, L., & HORTAÇSU, A. (2010) · The Journal of Industrial Economics · doi:10.1111/j.1467-6451.2010.00405.x · Cited by 505 · see citing works
Online Product Reviews-Triggered Dynamic Pricing: Theory and Evidence
Feng, J., Li, X., & Zhang, X. (. (2019) · Information Systems Research · doi:10.1287/isre.2019.0852 · Cited by 117 · see citing works
Designing reputation mechanisms
Dellarocas, C., Dini, F., & Spagnolo, G. (2006) · Handbook of Procurement · doi:10.1017/cbo9780511492556.019 · Cited by 44 · see citing works
Klein, T. J., Lambertz, C., Spagnolo, G., & Stahl, K. O. (2009) · International Journal of Electronic Business · doi:10.1504/ijeb.2009.026532 · Cited by 40 · see citing works
Reputation effects in socially driven sharing economy transactions
Ter Huurne, M., Ronteltap, A., Guo, C., Corten, R., & Buskens, V. (2018) · Sustainability · doi:10.3390/su10082674 · Cited by 33 · see citing works
- Authors
- McDonald, C. G., & Slawson, V. C.
- Affiliations
- University of Missouri (US)
- Louisiana State University (US)
- Corresponding author
- McDonald, Cynthia G.
- Slawson, V. Carlos
- ORCID
- Slawson, V. Carlos
- Venue
- Economic Inquiry
- Publisher
- Wiley
- Published
- 2002-10
- Volume
- 40
- Issue
- 4
- Pages
- 633-650
- ISSN
- 0043-3640 (ISSN-L)
- 0095-2583
- 1465-7295
- OpenAlex
- W3124429632
- Cited by
- 277
- References
- 1
- Citations by year
- 2026: 3 · 2025: 3 · 2024: 5 · 2023: 3 · 2022: 2 · 2021: 1 · 2020: 7 · 2019: 7 · 2018: 11 · 2017: 9 · 2016: 10 · 2015: 8 · 2014: 10 · 2013: 11 · 2012: 31
- FWCI
- 24.96
- Type
- journal article
- Language
- en
- Open access
- green
- doi.org
- Locations
- Economic Inquiry (publishedVersion)
- SSRN Electronic Journal (acceptedVersion)
- Civil War Book Review (submittedVersion)
- Topics
- Social Sciences › Decision Sciences › Management Science and Operations Research › Auction Theory and Applications
- Social Sciences › Business, Management and Accounting › Strategy and Management › Digital Platforms and Economics
- Social Sciences › Business, Management and Accounting › Business and International Management › E-commerce and Technology Innovations
- Keywords
- reputation, online auctions, information asymmetry, counterparty risk, anonymity, seller reputation, online marketplaces, buyer-seller relationships
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