Buying Reputation as a Signal of Quality: Evidence from an Online Marketplace / Lingfang (Ivy) Li, Steven Tadelis, Xiaolan Zhou.

Format:

Book

Author/Creator:

Li, .

Contributor:

National Bureau of Economic Research.

Tadelis, Steven.

Zhou, Xiaolan.

Series:

Working Paper Series (National Bureau of Economic Research) no. w22584.

NBER working paper series no. w22584

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Buying Reputation as a Signal of Quality

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2016.

Summary:

Reputation is critical to foster trust in online marketplaces, yet leaving feedback is a public good that can be under-provided unless buyers are rewarded for it. Signaling theory implies that only high quality sellers would reward buyers for truthful feedback. We explore this scope for signaling using Taobao's "reward-for-feedback" mechanism and find that items with rewards generate sales that are nearly 30% higher and are sold by higher quality sellers. The market design implication is that marketplaces can benefit from allowing sellers to use rewards to build reputations and signal their high quality in the process.

Notes:

Print version record

September 2016.