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Reputation premium and reputation management: Evidence from the largest e-commerce platform in China

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  • Fan, Ying
  • Ju, Jiandong
  • Xiao, Mo

Abstract

We study the life-cycle effects of reputation using a panel data set consisting of a 25% random sample of all sellers on China's largest e-commerce platform, Taobao.com. We find a substantial return to reputation, but only for established sellers. New sellers, in contrast, lower their prices to boost transaction volume and ratings. This reputation management by new sellers leads to a decrease in their revenue in the short run and even a decrease in their business' survival likelihood in the longer run. We show that such differential effects at different stages of a seller's business life-cycle can arise when the effect of reputation on future payoffs dominates that on current payoffs.

Suggested Citation

  • Fan, Ying & Ju, Jiandong & Xiao, Mo, 2016. "Reputation premium and reputation management: Evidence from the largest e-commerce platform in China," International Journal of Industrial Organization, Elsevier, vol. 46(C), pages 63-76.
    • Handle: RePEc:eee:indorg:v:46:y:2016:i:c:p:63-76
    DOI: 10.1016/j.ijindorg.2016.01.004
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    Cited by:

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    2. Maggie X. Chen & Min Wu, 2021. "The Value of Reputation in Trade: Evidence from Alibaba," The Review of Economics and Statistics, MIT Press, vol. 103(5), pages 857-873, December.
    3. Jingbo Hu & Taohua Ouyang & William X. Wei & Jiawei Cai, 2020. "How Do Manufacturing Enterprises Construct E-Commerce Platforms for Sustainable Development? A Case Study of Resource Orchestration," Sustainability, MDPI, vol. 12(16), pages 1-18, August.
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    5. Jifeng Luo & Ying Rong & Huan Zheng, 2020. "Impacts of logistics information on sales: Evidence from Alibaba," Naval Research Logistics (NRL), John Wiley & Sons, vol. 67(8), pages 646-669, December.
    6. Ginger Zhe Jin & Zhentong Lu & Xiaolu Zhou & Lu Fang, 2021. "Flagship Entry in Online Marketplaces," NBER Working Papers 29239, National Bureau of Economic Research, Inc.
    7. Che, X. & Katayama, H. & Lee, P., 2020. "Willingness to Pay for Brand Reputation: Lessons from the Volkswagen Diesel Emissions Scandal," Working Papers 20/02, Department of Economics, City University London.
    8. Xu Zhang & Puneet Manchanda & Junhong Chu, 2021. "“Meet Me Halfway”: The Costs and Benefits of Bargaining," Marketing Science, INFORMS, vol. 40(6), pages 1081-1105, November.
    9. Aggarwal, Mayank & Chakrabarti, Anindya S. & Chatterjee, Chirantan & Higgins, Matthew J., 2023. "Research and market structure: Evidence from an antibiotic-resistant pathogenic outbreak," Research Policy, Elsevier, vol. 52(1).
    10. Robert Stefko & Richard Fedorko & Radovan Bacik, 2016. "Website Content Quality In Terms Of Perceived Image Of Higher Education Institution," Polish Journal of Management Studies, Czestochowa Technical University, Department of Management, vol. 13(2), pages 153-163, June.
    11. Michelangelo Rossi, 2019. "How Does Competition Affect Reputation Concerns? Theory and Evidence from Airbnb," CESifo Working Paper Series 7972, CESifo.
    12. Lingfang (Ivy) Li & Steven Tadelis & Xiaolan Zhou, 2020. "Buying reputation as a signal of quality: Evidence from an online marketplace," RAND Journal of Economics, RAND Corporation, vol. 51(4), pages 965-988, December.
    13. Robinson, Tenesha Y. & Smith-Jackson, Tonya, 2023. "Breaking barriers through the digital workforce: Providing IT training and employment pipelines for ex-offenders," Technological Forecasting and Social Change, Elsevier, vol. 190(C).
    14. Narwal, Preeti & Nayak, J.K., 2020. "How consumers form product quality perceptions in absence of fixed posted prices: Interaction of product cues with seller reputation and third-party reviews," Journal of Retailing and Consumer Services, Elsevier, vol. 52(C).
    15. Simone T. Peinkofer & Yao Henry Jin, 2023. "The impact of order fulfillment information disclosure on consequences of deceptive counterfeits," Production and Operations Management, Production and Operations Management Society, vol. 32(1), pages 237-260, January.
    16. Franz Hackl & Rudolf Winter-Ebmer, 2020. "Customer reactions to a webshop’s service quality," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 47(4), pages 699-731, November.
    17. Wei Zhou & Zidong Wang, 2020. "Competing for Search Traffic in Query Markets: Entry Strategy, Platform Design, and Entrepreneurship," Working Papers 20-12, NET Institute.
    18. Nicolas Eschenbaum & Helge Liebert, 2021. "Dealing with Uncertainty: The Value of Reputation in the Absence of Legal Institutions," Papers 2107.11314, arXiv.org.
    19. Elliot Anenberg & Chun Kuang & Edward Kung, 2022. "Social learning and local consumption amenities: Evidence from Yelp," Journal of Industrial Economics, Wiley Blackwell, vol. 70(2), pages 294-322, June.
    20. Stefano Castriota & Alessandro Fedele, 2021. "Does Excellence Pay Off? Theory and Evidence from the Wine Market," BEMPS - Bozen Economics & Management Paper Series BEMPS77, Faculty of Economics and Management at the Free University of Bozen.
    21. Siqi Liu & Bhoomija Ranjan & Benjamin Reed Shiller, 2020. "Are Coarse Ratings Fine? Applications to Crashworthiness Ratings," Working Papers 132, Brandeis University, Department of Economics and International Business School.
    22. Yang, Zhengliang & Du, Xiaoxue & Hatzenbuehler, Patrick & Lu, Liang & Reardon, Thomas & Tian, Guang, 2021. "Agri-Food Products Live Streaming: Fad or a New Marketing Channel?," 2021 Conference, August 17-31, 2021, Virtual 315334, International Association of Agricultural Economists.
    23. Witek-Hajduk Marzanna Katarzyna & Grudecka Anna, 2022. "Consumer intentions to purchase on foreign multi-sided digital platforms: a context of the COVID-19 pandemic," International Journal of Management and Economics, Warsaw School of Economics, Collegium of World Economy, vol. 58(2), pages 143-160, June.
    24. Zemin (Zachary) Zhong, 2022. "Chasing Diamonds and Crowns: Consumer Limited Attention and Seller Response," Management Science, INFORMS, vol. 68(6), pages 4380-4397, June.
    25. Xia Li, 2022. "The impact of place-of-origin on price premium for agricultural products: empirical evidence from Taobao.com," Electronic Commerce Research, Springer, vol. 22(2), pages 561-584, June.

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    More about this item

    Keywords

    Reputation management; Reputation dynamics; E-commerce;
    All these keywords.

    JEL classification:

    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce

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