eBay’s Reputation System. Pooja Kailay. Reputation Systems. Traditional Local Retail Transactions Ability to inspect product physically Long standing reputation Word of mouth from relatives, friends Internet Dealings Transaction among strangers No physical manifestation
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eBay’s Reputation System PoojaKailay
Reputation Systems • Traditional • Local Retail Transactions • Ability to inspect product physically • Long standing reputation • Word of mouth from relatives, friends • Internet Dealings • Transaction among strangers • No physical manifestation • Buyers and Sellers provide feedback about each other
Internet-Based Reputation Systems • Minimal/Nil cost of providing evaluations • Provide more information than retail operations • Feedback based on various seller characteristics • More than half of buyers provide feedback • Disincentive to provide negative feedback
eBay’s Feedback System • Users(Buyer/Seller) register giving name, contact info and email-id(verified) • Select a pseudonym visible to other users • Buyer(winning bid) and Seller can comment about each other after transactions • Comments: one line of text; numeric rating[+1:positive,0:neutral,-1:negative] • Feedback Summary=No. of unique users who gave positive feedback-No. of unique users who gave negative feedback
Characteristics of eBay marketplace • Are most transaction among strangers or ongoing trading relationships developed? • What is the distribution of prior feedback for buyers and sellers? • Are buying and selling roles distinct? • 17.9% involve buyer and seller who’ve traded before • 89.0% conducted just one transaction • Multiple transaction occurred within a few days of each other
Buyer v/s Seller feedbackSellers tend to be more experiencedSellers’ median was 33(score 82)Buyers’ median was 8
Of feedback provided by buyers,0.6% were negative,0.3% neutral and 99.1% positiveSellers were less happy(most common complaint:winning bidder did’nt follow through)
Affect of Prior Feedback on Future Performance • Negative feedback less frequently directed to experienced sellers.
Do Buyers reward better reputations? • Do reputations affect sale probability and selling price? • Independent studies reported a significant effect of negative feedback reducing sale price and vice versa • More positives and fewer negatives and neutrals appear to affect the probability of sale
Do Sellers care about their feedback profiles? • Starting February 1999,eBay offered users the opportunity to respond to feedback • Out of a sample of 1580 negative responses, recipients entered explanatory texts 29% of the time. • Conclusion: Sellers were concerned how negative feedback would affect their reputations.
High Courtesy Equilibrium • 2 Facts: • High rate of providing evaluations • Extreme rarity of neutral or negative evaluations High-Courtesy-Equilibrium: Manners frequently lead people to make small cost efforts,even when dealing with strangers that one will never again encounter, that promote general welfare and a sense of comity.
eBay induced Positives • In computing overall score, eBay merely subtracts negatives from positives despite negatives being much rarer and hence more informative. • No facility for searching a seller’s negative feedback, one has to scroll through all feedbacks. • Encourages buyers to contact sellers to resolve problems and leave negative feedback only as a last resort. • Policy of reverse feedback creates reciprocal obligation to provide positive feedback.
Conclusion • Significant volume of feedback(median seller score:33) and the ability to spread it to all potential customers make up for the lack of traditional feedback mechanisms. • Extremely low percentage of problematic feedback(0.3% negative,0.3% neutral) highly suspicious • Perception of the user that the system is effective and reliable matters: buyers depend strongly on reputations, sellers behave well and bad sellers deterred.