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When and Why Do Buyers Rate in Online Markets?

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  • Xiang Hui
  • Tobias J. Klein
  • Konrad Stahl

Abstract

Anonymous markets would be very difficult to successfully operate without the possibility that buyers rate the seller. Yet many empirical results yield that ratings are non-random and concentrate on extreme experiences. We develop a model of rating decisions in which the buyer is willing to share publicly her opinion about a transaction, if its realized quality differs much from the quality expected by her, where expected quality is influenced by an aggregate of the seller’s past ratings. We demonstrate our results empirically using raw data from eBay. In spite of the non-randomness of responses, unweighted rating aggregates appear to rather well reflect reported buyer experience as long as expectations are not extreme.

Suggested Citation

  • Xiang Hui & Tobias J. Klein & Konrad Stahl, 2021. "When and Why Do Buyers Rate in Online Markets?," CRC TR 224 Discussion Paper Series crctr224_2021_267v1, University of Bonn and University of Mannheim, Germany.
    • Handle: RePEc:bon:boncrc:crctr224_2021_267v1
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    Cited by:

    1. Martin, Simon & Shelegia, Sandro, 2021. "Underpromise and overdeliver? - Online product reviews and firm pricing," International Journal of Industrial Organization, Elsevier, vol. 79(C).
    2. Andrey Fradkin & David Holtz, 2023. "Do Incentives to Review Help the Market? Evidence from a Field Experiment on Airbnb," Marketing Science, INFORMS, vol. 42(5), pages 853-865, September.

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    More about this item

    Keywords

    Online Markets; Rating; Reputation;
    All these keywords.

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce

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