The limits of reputation in platform markets: An empirical analysis and field experiment

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.

Nosko, C. and Tadelis, S. (2015), 'The limits of reputation in platform markets: An empirical analysis and field experiment,' Working paper no. 20830, NBER (National Bureau of Economic Research).

Metadata

  • no specific sector focus
  • Other
  • 2015
  • Research publication
  • rating
  • English
  • NBER (National Bureau of Economic Research) (Research institute)
  • Quantitative research
  • Subscription
Disclaimer  —  Eurofound aims to keep the information in this database up to date and accurate. If errors are brought to our attention, we will try to correct them. However, Eurofound bears no responsibility or liability whatsoever with regard to the accuracy or content of this database or of external links over which Eurofound services have no control and for which Eurofound assumes no responsibility.