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Losing to Win: Reputation Management of Online Sellers

  • Mo Xiao

    (University of Arizona)

  • Jiandong Ju

    (Tsinghua University)

  • Ying Fan

    (University of Michigan)

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Reputation is generally considered an asset, especially in e-commerce markets. Any reputation system, however, elicits strategic responses from the sellers. Using panel data on a large random sample of online sellers from China’s largest e-commerce platform, Taobao.com, we study how reputation affects revenue, prices, transaction volume, and survival likelihood as well as how sellers manage their reputation. We find that seller reputation has a substantial positive impact on established sellers, but new sellers fail to reap such benefits. Pursuing the long-run returns to reputation, new sellers actively manage their reputation by engaging in costly activities such as sales and switching product categories. In this "losing to win" process, new sellers may have spent too much resource to survive to next stage. Our results provide empirical support for the theory of career concern and reputation dynamics.

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File URL: https://economicdynamics.org/meetpapers/2013/paper_192.pdf
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Paper provided by Society for Economic Dynamics in its series 2013 Meeting Papers with number 192.

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Date of creation: 2013
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Handle: RePEc:red:sed013:192
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Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA

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  1. 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.
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  7. Steven Tadelis, 2002. "The Market for Reputations as an Incentive Mechanism," Journal of Political Economy, University of Chicago Press, vol. 110(4), pages 854-882, August.
  8. Luís Cabral & Ali Hortaçsu, 2010. "THE DYNAMICS OF SELLER REPUTATION: EVIDENCE FROM EBAY -super-," Journal of Industrial Economics, Wiley Blackwell, vol. 58(1), pages 54-78, 03.
  9. 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.
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