The Limits of Reputation in Platform Markets: An Empirical Analysis and Field Experiment

Chris Nosko and Steven Tadelis

No 20830, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We argue that reputation mechanisms used by platform markets suffer from two problems. First, buyers may draw conclusions about the quality of the platform from single transactions, causing a reputational externality across sellers. Second, for a variety of reasons we discuss, reputations will be biased. We document these problems using eBay data and claim that platforms can benefit from identifying and promoting higher quality sellers. We create an unobservable measure of seller quality and demonstrate the benefits of our approach through a controlled experiment that prioritizes better quality sellers. We highlight the importance of reputational externalities and chart an agenda that aims to create more realistic models of platform markets.

JEL-codes: D47 D82 L15 L21 L86 (search for similar items in EconPapers)
Date: 2015-01
New Economics Papers: this item is included in nep-com, nep-exp and nep-net
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Citations: View citations in EconPapers (109)

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