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Designing Online Marketplaces: Trust and Reputation Mechanisms

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  • Michael Luca

    (Harvard Business School, Negotiation, Organizations & Markets Unit)

Abstract

Online marketplaces have proliferated over the past decade, creating new markets where none existed. By reducing transaction costs, online marketplaces facilitate transactions that otherwise would not have occurred and enable easier entry of small sellers. One central challenge faced by designers of online marketplaces is how to build enough trust to facilitate transactions between strangers. This paper provides an economist's toolkit for designing online marketplaces, focusing on trust and reputation mechanisms.

Suggested Citation

  • Michael Luca, 2016. "Designing Online Marketplaces: Trust and Reputation Mechanisms," Harvard Business School Working Papers 17-017, Harvard Business School.
    • Handle: RePEc:hbs:wpaper:17-017
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    File URL: http://www.hbs.edu/faculty/pages/download.aspx?name=17-017.pdf
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    References listed on IDEAS

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    Cited by:

    1. Tan, Zhi Ming & Aggarwal, Nikita & Cowls, Josh & Morley, Jessica & Taddeo, Mariarosaria & Floridi, Luciano, 2021. "The ethical debate about the gig economy: A review and critical analysis," Technology in Society, Elsevier, vol. 65(C).
    2. Marcello Basili & Maria Alessandra Rossi, 2018. "Platform-mediated reputation systems in the sharing economy and incentives to provide service quality: the case of ridesharing services," Department of Economics University of Siena 787, Department of Economics, University of Siena.
    3. Lukac, Martin & Grow, André, 2020. "Reputation systems and recruitment in online labor markets: insights from an agent-based model," LSE Research Online Documents on Economics 114454, London School of Economics and Political Science, LSE Library.
    4. Nuno Martins & Daniel Brandão & Heitor Alvelos & Sara Silva, 2020. "E-Marketplace as a Tool for the Revitalization of Portuguese Craft Industry: The Design Process in the Development of an Online Platform," Future Internet, MDPI, vol. 12(11), pages 1-23, November.
    5. Martin Lukac & André Grow, 2021. "Reputation systems and recruitment in online labor markets: insights from an agent-based model," Journal of Computational Social Science, Springer, vol. 4(1), pages 207-229, May.
    6. Heidrun Hoppe-Wewetzer & Christian Siemering, 2022. "Advertisement-financed credit ratings," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 46(1), pages 188-206, January.
    7. Alex Wood-Doughty, 2016. "Do Employers Learn from Public, Subjective, Performance Reviews?," Working Papers 16-11, NET Institute.
    8. Kornberger, Martin & Pflueger, Dane & Mouritsen, Jan, 2017. "Evaluative infrastructures: Accounting for platform organization," Accounting, Organizations and Society, Elsevier, vol. 60(C), pages 79-95.

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