The Effect of Reputation on Selling Prices in Auctions
It is often argued in economics that building a reputation for trustworthiness could help individuals or firms to mitigate or even overcome problems of contractual incompleteness. In this paper, we use data from the German eBay website to test whether a seller’s bad reputation has an effect on selling prices. For auctions of popular DVDs at eBay we do indeed find evidence for this hypothesis. We show that an increase in the share of negative ratings of one percentage point decreases the selling price by about 4 per cent. The number of negative ratings, in contrast, does not affect the selling price significantly. Hence, bidders on the eBay marketplace seem to concentrate on relative rather than on absolute measures of reputation. Further, we challenge the recommendation that it is profitable for eBay sellers to let their auction end in the evening, when many potential buyers are supposed to be online. We find that prices are relatively lower in the evening. This may be due to a much higher supply of DVDs in the evening.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 228 (2008)
Issue (Month): 4 (August)
|Contact details of provider:|| Web page: https://www.degruyter.com|
|Order Information:||Web: https://www.degruyter.com/view/j/jbnst|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Patrick Bajari & Ali Hortaçsu, 2004. "Economic Insights from Internet Auctions," Journal of Economic Literature, American Economic Association, vol. 42(2), pages 457-486, June.
- Harrington, Joseph Jr., 1989. "Collusion among asymmetric firms: The case of different discount factors," International Journal of Industrial Organization, Elsevier, vol. 7(2), pages 289-307, June.
- Alvin E. Roth & Axel Ockenfels, 2002.
"Last-Minute Bidding and the Rules for Ending Second-Price Auctions: Evidence from eBay and Amazon Auctions on the Internet,"
American Economic Review,
American Economic Association, vol. 92(4), pages 1093-1103, September.
- Alvin E. Roth & Axel Ockenfels, "undated". "Last-Minute Bidding and the Rules for Ending Second-Price Auctions: Evidence from eBay and Amazon Auctions on the Internet," Papers on Strategic Interaction 2002-32, Max Planck Institute of Economics, Strategic Interaction Group.
- Dye, Ronald A, 1984. "The Trouble with Tournaments," Economic Inquiry, Western Economic Association International, vol. 22(1), pages 147-149, January.
- Resnick, Paul & Zeckhauser, Richard & Swanson, John & Lockwood, Kate, 2003.
"The Value of Reputation on eBay: A Controlled Experiment,"
Working Paper Series
rwp03-007, Harvard University, John F. Kennedy School of Government.
- Paul Resnick & Richard Zeckhauser & John Swanson & Kate Lockwood, 2006. "The value of reputation on eBay: A controlled experiment," Experimental Economics, Springer;Economic Science Association, vol. 9(2), pages 79-101, June.
- Richard H. Thaler, 2008.
"Mental Accounting and Consumer Choice,"
INFORMS, vol. 27(1), pages 15-25, 01-02.
- George Baker & Robert Gibbons & Kevin J. Murphy, 1994. "Subjective Performance Measures in Optimal Incentive Contracts," The Quarterly Journal of Economics, Oxford University Press, vol. 109(4), pages 1125-1156.
- Kreps, David M. & Wilson, Robert, 1982.
"Reputation and imperfect information,"
Journal of Economic Theory,
Elsevier, vol. 27(2), pages 253-279, August.
- Cynthia G. McDonald & V. Carlos Slawson, 2002. "Reputation in An Internet Auction Market," Economic Inquiry, Western Economic Association International, vol. 40(4), pages 633-650, October.
- Daniel Houser & John Wooders, 2006. "Reputation in Auctions: Theory, and Evidence from eBay," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 15(2), pages 353-369, 06.
- George Baker & Robert Gibbons & Kevin J. Murphy, 2002. "Relational Contracts and the Theory of the Firm," The Quarterly Journal of Economics, Oxford University Press, vol. 117(1), pages 39-84.
- Cabral, Luís M B & Hortaçsu, Ali, 2004.
"The Dynamics of Seller Reputation: Theory and Evidence from eBay,"
CEPR Discussion Papers
4345, C.E.P.R. Discussion Papers.
- Luís Cabral & Ali Hortacsu, 2004. "The Dynamics of Seller Reputation: Theory and Evidence from eBay," Working Papers 04-05, New York University, Leonard N. Stern School of Business, Department of Economics.
- Luis Cabral & Ali Hortacsu, 2004. "The Dynamics of Seller Reputation: Theory and Evidence from eBay," NBER Working Papers 10363, National Bureau of Economic Research, Inc.
- Diamond, Douglas W, 1989.
"Reputation Acquisition in Debt Markets,"
Journal of Political Economy,
University of Chicago Press, vol. 97(4), pages 828-862, August.
- Amos Tversky & Daniel Kahneman, 1979.
"Prospect Theory: An Analysis of Decision under Risk,"
Levine's Working Paper Archive
7656, David K. Levine.
- Kahneman, Daniel & Tversky, Amos, 1979. "Prospect Theory: An Analysis of Decision under Risk," Econometrica, Econometric Society, vol. 47(2), pages 263-291, March.
- Lazear, Edward P, 1979. "Why Is There Mandatory Retirement?," Journal of Political Economy, University of Chicago Press, vol. 87(6), pages 1261-1284, December.
- Jeffrey A. Livingston, 2005. "How Valuable Is a Good Reputation? A Sample Selection Model of Internet Auctions," The Review of Economics and Statistics, MIT Press, vol. 87(3), pages 453-465, August.
- Carl Shapiro, 1983. "Premiums for High Quality Products as Returns to Reputations," The Quarterly Journal of Economics, Oxford University Press, vol. 98(4), pages 659-679.
- Garvey, Gerald T., 1995. "Why reputation favors joint ventures over vertical and horizontal integration A simple model," Journal of Economic Behavior & Organization, Elsevier, vol. 28(3), pages 387-397, December.
- Chemmanur, Thomas J & Fulghieri, Paolo, 1994. " Investment Bank Reputation, Information Production, and Financial Intermediation," Journal of Finance, American Finance Association, vol. 49(1), pages 57-79, March.
- Maija Halonen, 2002. "Reputation And The Allocation Of Ownership," Economic Journal, Royal Economic Society, vol. 112(481), pages 539-558, July.
- Steven A. Matthews, 1995. "A Technical Primer on Auction Theory I: Independent Private Values," Discussion Papers 1096, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Philippe Robert-Demontrond & R. Ringoot, 2004. "Introduction," Post-Print halshs-00081823, HAL.
When requesting a correction, please mention this item's handle: RePEc:jns:jbstat:v:228:y:2008:i:4:p:345-356. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Peter Golla)
If references are entirely missing, you can add them using this form.