Loading...
Please wait, while we are loading the content...
ebusiness@mit.edu or 617-253-7054Analyzing the economic efficiency of eBay-like online reputation reporting mechanisms ¶ (2001)
| Content Provider | CiteSeerX |
|---|---|
| Author | Dellarocas, Chrysanthos |
| Abstract | This paper introduces a model for analyzing marketplaces, such as eBay, which rely on binary reputation mechanisms for quality signaling and quality control. In our model sellers keep their actual quality private and choose what quality to advertise. The reputation mechanism is primarily used to induce sellers to advertise truthfully. Buyers base their ratings on the difference between expected and actual quality. Furthermore, raters are lenient and do not post negative ratings unless transactions end up exceptionally bad. It is shown that, in such a setting, the fairness of the market outcome is determined by the relationship between rating leniency and corresponding strictness when assessing a seller’s feedback profile. If buyers judge sellers too strictly (relative to how leniently they rate) then, at steady state, sellers will be forced to understate their true quality. On the other hand, if buyers judge too leniently then sellers can get away with consistently overstating their true quality. An optimal judgment rule, which results in outcomes where, at steady state, buyers accurately predict the true quality of sellers, is theoretically possible to derive for all leniency levels. Furthermore, if buyers judge sellers using that rule, then the more lenient buyers are when rating sellers, the more likely it is that sellers will find it optimal to settle down to steady-state quality levels, as opposed to oscillating between good quality and bad quality. However, it is argued that this |
| File Format | |
| Publisher Date | 2001-01-01 |
| Access Restriction | Open |
| Subject Keyword | Ebusiness Mit Lenient Buyer Model Seller Seller Feedback Profile Steady State Binary Reputation Mechanism True Quality Actual Quality Good Quality Ebay-like Online Reputation Reporting Mechanism Negative Rating Bad Quality Rating Leniency Quality Signaling Economic Efficiency Optimal Judgment Rule Steady-state Quality Level Rating Seller Leniency Level Reputation Mechanism Market Outcome |
| Content Type | Text |
| Resource Type | Article |
