The Value of Feedback: An Analysis of the Reputation System
Year: 2015
Type: preprint
Abstract: Markets prone to asymmetric information employ trust mechanisms to overcome ineciencies arising from adverse selection and/or moral hazard. We explore a change in such a trust mechanism and its eect on the marketplace. Starting 2008, sellers on eBay can no-longer leave non-positive feedbacks for sellers to prevent retaliation. We show that this policy had two important impacts: rst, the very worst sellers who used retaliation in the past exit the market disproportionately, resulting in an increase in sellers’ quality and reduction in adverse selection; second, the quality of transactions by surviving sellers increased, consistent with a reduction in moral hazard.
Source: SSRN Electronic Journal
Authors: Maryam Saeedi, Zeqian Shen, Neel Sundaresan
Institutions: Carnegie Mellon University, eBay (Ireland)
Language: English
Field: Decision Sciences
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W2182079415