The actual structure of eBay's feedback mechanism and early evidence on the effects of recent changes

Abstract

AbstracteBay's feedback mechanism is considered crucial to establishing and maintaining trust on the world's largest trading platform. The effects of a user's reputation on the probability of sale and on prices are at the center of a large number of studies. More recent theoretical work considers aspects of the mechanism itself. Yet, there is confusion amongst users about its exact institutional details, which also changed substantially in the last few months. An understanding of these details, and how the mechanism is perceived by users, is crucial for any assessment of the system. We provide a thorough description of the institutional setup of eBay's feedback mechanism, including recent changes to it. Most importantly, buyers now have the possibility to leave additional, anonymous ratings on sellers on four different criteria. We discuss the implications of these changes and provide first descriptive evidence on their impact on rating behavior. JEL Classification: D44, L15, L86.

Market Transparency, Adverse Selection, and Moral Hazard

“…Resnick and Zeckhauser (2002) provide reduced-form evidence that points towards underreporting of negative experiences, and Klein, Lambertz, Spagnolo, and Stahl (2006) complement this by showing that the probability to leave a negative rating increases substantially towards the end of the period in which feedback can be left. Klein, Lambertz, Spagnolo, and Stahl (2009) provide detailed information on the actual structure of the feedback mechanism and provide first descriptive evidence on the newly introduced DSRs. Bolton, Greiner, and Ockenfels (2013) also provide such evidence and complement it with an experimental study.…”

Oblivion of online reputation: how time cues improve online recruitment

“…User interface cues were found to influence the behaviour of actors in electronic market environments: for example, visually cueing to the human face of sales personnel was found to increase consumer trust on e-commerce websites (Aldiri et al, 2008). Also, the design of reputation systems was shown to influence the effect of a market actor's reputation on a transaction (Klein et al, 2009;Zhu and Zhang, 2010). In online political discussion fora, visual interface cues were found to make online community members listen better to each other's opinions (Manosevitch et al, 2014).…”

Reciprocity through ratings: An experimental study of bias in evaluations

“…The role of reciprocity is especially visible in twosided rating environments, in which both buyers and sellers rate one another. When both sides of the market can rate one another, ratings are used strategically to punish or reward other members of the market and to protect one's own reputation (Klein et al 2006;Klein et al 2009;Bolton, Greiner, and Ockenfels 2013). Such strategic concerns can damage the informational content of ratings, as raters become more concerned with protecting their own reputation than with accurately describing quality.…”