Trust and Reputation in Internet Auctions

Diekmann, Andreas; Jann, Ben; Wyder, David (January 2004). Trust and Reputation in Internet Auctions (ETH Zurich Sociology Working Papers No. 1). Zürich: ETH Zurich

	Text diekmann_jann_wyder_reputation.pdf - Published Version Restricted to registered users only Available under License Publisher holds Copyright. Download (367kB) | Request a copy
	Archive (Data and documentation) diekmann_jann_wyder_reputation_data.zip - Supplemental Material Available under License BORIS Standard License. Download (29kB)

Exchange between anonymous actors in Internet auctions corresponds to a one-shot prisoner's dilemma-like situation. Therefore, in any given auction the risk is high that seller and buyer will cheat and, as a consequence, that the market will collapse. However, mutual cooperation can be attained by the simple and very efficient institution of a public rating system. By this system, sellers have incentives to invest in reputation in order to enhance future chances of business. Using data from about 200 auctions of mobile phones we empirically explore the effects of the reputation system. In general, the analysis of nonobtrusive data from auctions may help to gain a deeper understanding of basic social processes of exchange, reputation, trust, and cooperation, and of the impact of institutions on the efficiency of markets. In this study we report empirical estimates of effects of reputation on characteristics of transactions such as the probability of a successful deal, the mode of payment, and the selling price (highest bid). In particular, we try to answer the question whether sellers receive a "premium" for reputation. Our results show that buyers are willing to pay higher prices for reputation in order to diminish the risk of exploitation. On the other hand, sellers protect themselves from cheating buyers by the choice of an appropriate payment mode. Therefore, despite the risk of mutual opportunistic behavior, simple institutional settings lead to cooperation, relatively rare events of fraud, and efficient markets.

Interest & Impact

Downloads

58 since deposited on 30 Jun 2016
1 in the past 12 months

Citations

5 Citations in Web of Science ®
6 Citations in Scopus

Search

in Google Scholar™

Services

Actions (login required)

Edit item

Actions (login required)

Edit item