Improving the competitiveness of online markets of credence goods with reputation mechanisms

N. Saperov

Journal of Modern Competition, 2013, issue 5, 44-64

Abstract: Rapid development of markets for experience and credence goods in XXI century has not yet been analyzed in Russian academical literature. Meanwhile these markets has institutionalized and changed organizational structure and rules of some markets, for instance, private tutors market (internet site www.repetitors.info) and home-rent market (internet site www.airbnb.com). In this article I analyze internet markets in context of assymetric information and adverse selection, comparing them to offline markets. Key thesis is that online markets without reputational mechanisms are less efficient compare to offline markets. I consider list of recent research of reputation on online markets which offer different mechanisms to avoid adverse selection on internet. I compare social interactions of consumers and web 2.0 (user-generated content) instruments. I conclude that online markets should help seller of experience good (or service) to build his reputation through stimulating his consumers to share information in their social accounts. In conclusion I suggest more directions for deeper analysis of these phenomena.

Date: 2013
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