Does Cheap Talk Affect Market Outcomes? Evidence from eBay / Daniel W. Elfenbein, Raymond Fisman, Brian McManus.

Format:

Book

Author/Creator:

Elfenbein, Daniel W.

Contributor:

National Bureau of Economic Research.

Fisman, Raymond.

McManus, Brian.

Series:

Working Paper Series (National Bureau of Economic Research) no. w24437.

NBER working paper series no. w24437

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2018.

Summary:

We study the use of and response to cheap talk by firms and their consumers, focusing on unverifiable promises of charitable donations on eBay. For transactions during March 2005 - May 2006, cheap talk listings have lower sales probabilities but sell at higher prices when they are successful. The negative relationship between cheap talk and sales is concentrated in the months following Hurricane Katrina, a time when both verifiable and unverifiable charity-related listings increased dramatically. Finally, we show that cheap talk sellers have significantly lower quality ratings than sellers who make verifiable donations. Collectively, our results suggest that most buyers (justifiably) avoid cheap talk listings when credible quality signals are available, thus limiting the extent of cheap talk under these conditions.

Notes:

Print version record

March 2018.