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Is the ebay feedback system really efficient ? an experimental study

Author

Listed:
  • David Masclet

    (CREM - CNRS - CIRANO)

  • Thierry Pénard

    (CREM – CNRS - University of Rennes 1)

Abstract

The eBay Feedback Forum is claimed to be a crucial component of the success of eBay. Many empirical studies have found that this feedback system exerts a deterrent effect on the opportunistic behavior the Internet's anonymity may incite buyers and sellers to adopt. The feedback system in place on eBay is however far from being perfect and may be especially vulnerable to strategic ratings (or nonratings) that might reduce the informational content of feedback profiles. This article aims to examine the efficiency of the eBay feedback system, through a set of experiments based on the trust game. Our experimental design consists of four different treatments. The baseline treatment corresponds to a finite repeated simultaneous trust game. The second treatment, called “eBay rating” is identical to the baseline treatment except that we added a second stage in which the players have the opportunity of rating their partner. In this treatment, each participant is given the choice to either evaluate immediately or wait, knowing that only one rating will be accepted. The third treatment, called "Sequential rating" is identical to the “eBay rating” treatment, except that the order in which players evaluate one another is randomly determined by the computer. Finally in the fourth treatment, called “Simultaneous rating”, both players are required to make their rating decisions simultaneously. Our experimental results indicate that the eBay feedback system could be improved by either constraining partners to leave ratings simultaneously or by predetermining the rating sequence.

Suggested Citation

  • David Masclet & Thierry Pénard, 2008. "Is the ebay feedback system really efficient ? an experimental study," Economics Working Paper Archive (University of Rennes 1 & University of Caen) 200803, Center for Research in Economics and Management (CREM), University of Rennes 1, University of Caen and CNRS.
  • Handle: RePEc:tut:cremwp:200803
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    File URL: https://crem-doc.univ-rennes1.fr/wp/2008/200803.pdf
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    References listed on IDEAS

    as
    1. 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.
    2. Gary E. Bolton & Elena Katok & Axel Ockenfels, 2004. "How Effective Are Electronic Reputation Mechanisms? An Experimental Investigation," Management Science, INFORMS, vol. 50(11), pages 1587-1602, November.
    3. Klein, Tobias J. & Lambertz, Christian & Spagnolo, Giancarlo & Stahl, Konrad O., 2006. "Last Minute Feedback," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 62, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
    4. 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, June.
    5. Robert Gazzale & Tapan Khopkar, 2011. "Remain silent and ye shall suffer: seller exploitation of reticent buyers in an experimental reputation system," Experimental Economics, Springer;Economic Science Association, vol. 14(2), pages 273-285, May.
    6. Dellarocas, Chrysanthos, 2003. "The Digitization of Word-of-mouth: Promise and Challenges of Online Feedback Mechanisms," Working papers 4296-03, Massachusetts Institute of Technology (MIT), Sloan School of Management.
    7. Berg Joyce & Dickhaut John & McCabe Kevin, 1995. "Trust, Reciprocity, and Social History," Games and Economic Behavior, Elsevier, vol. 10(1), pages 122-142, July.
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    Cited by:

    1. Li, Lingfang (Ivy) & Xiao, Erte, 2010. "Money Talks? An Experimental Study of Rebate in Reputation System Design," MPRA Paper 22401, University Library of Munich, Germany.

    More about this item

    JEL classification:

    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software

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