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The Transaction Cost Economics of Market-based Exchange: The Impact of Reputation and External Verification Agencies

Author

Listed:
  • Stephen Standifird
  • Marc Weinstein

Abstract

In this analysis, we empirically investigate market-based transaction costs. We measure market-based transaction costs indirectly by examining variations in market prices when selling Morgan Silver Dollars on eBay. We find that the reputation of both the seller and the coin-rating agency employed significantly influences the price premium obtained. Moreover, we find that the use of a coin-rating agency with a poor reputation proved more damaging than the use of no coin-rating agency. Thus, we find support for the suggestion that the reputation of sellers and third-party verification agencies have a significant influence on perceived market-based transaction costs.

Suggested Citation

  • Stephen Standifird & Marc Weinstein, 2007. "The Transaction Cost Economics of Market-based Exchange: The Impact of Reputation and External Verification Agencies," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 14(3), pages 409-431.
  • Handle: RePEc:taf:ijecbs:v:14:y:2007:i:3:p:409-431
    DOI: 10.1080/13571510701597510
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    References listed on IDEAS

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    1. Williamson, Oliver E, 1979. "Transaction-Cost Economics: The Governance of Contractural Relations," Journal of Law and Economics, University of Chicago Press, vol. 22(2), pages 233-261, October.
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    6. Nelson, Phillip, 1970. "Information and Consumer Behavior," Journal of Political Economy, University of Chicago Press, vol. 78(2), pages 311-329, March-Apr.
    7. James Jr., Harvey S., 2002. "The trust paradox: a survey of economic inquiries into the nature of trust and trustworthiness," Journal of Economic Behavior & Organization, Elsevier, vol. 47(3), pages 291-307, March.
    8. Globerman, Steven & Schwindt, Richard, 1986. "The organization of vertically related transactions in the Canadian forest products industries," Journal of Economic Behavior & Organization, Elsevier, vol. 7(2), pages 199-212, June.
    9. Geoffrey Hodgson, 2002. "The Legal Nature of the Firm and the Myth of the Firm-Market Hybrid," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 9(1), pages 37-60.
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    Cited by:

    1. Kevin Hasker & Robin Sickles, 2010. "eBay in the Economic Literature: Analysis of an Auction Marketplace," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 37(1), pages 3-42, August.

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    Keywords

    Transaction Costs; Reputation; Online Auctions;

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