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Trust, reputation and bidding behaviour in online mystery auctions

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  • Lesley Chiou
  • Jennifer Pate

Abstract

We use transactions from a distinctive online environment of ‘mystery’ auctions to examine the role that trust plays and how it impacts bidding behaviour when the exact characteristics of a good being auctioned are purposefully concealed from buyers. We show that buyers are generally trusting seller claims in online transactions and that seller reputation becomes significantly more important to buyers (as demonstrated by their bids) when the quality (or value) of the good is unspecified. Our findings can be extrapolated to consider broader economic implications of bidding behaviour impacted by trust, such as in financial markets, where over-bidding may lead to price bubbles.

Suggested Citation

  • Lesley Chiou & Jennifer Pate, 2018. "Trust, reputation and bidding behaviour in online mystery auctions," Applied Economics Letters, Taylor & Francis Journals, vol. 25(10), pages 702-706, June.
    • Handle: RePEc:taf:apeclt:v:25:y:2018:i:10:p:702-706
    DOI: 10.1080/13504851.2017.1358441
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