A good reputation pays off

We conducted the first randomized controlled field experiment of an Internet reputation mechanism. A high-reputation, established eBay dealer sold matched pairs of lots — batches of vintage postcards — under his regular identity and under new seller identities (also operated by him). As predicted, the established identity fared better. The difference in buyers’ willingness-to-pay was 8.1% of the selling price. A subsidiary experiment followed the same format, but compared sales by relatively new sellers with and without negative feedback. Surprisingly, one or two negative feedbacks for our new sellers did not affect buyers’ willingness-to-pay.

Source: “THE VALUE OF REPUTATION ON EBAY: A CONTROLLED EXPERIMENT” from KSG Working Paper Series No. RWP03-007

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