eBays Reputation System

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eBays Reputation System

• Pooja Kailay

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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

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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

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eBays 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
  rating1positive,0neutral,-1negative
• Feedback SummaryNo. of unique users who gave
  positive feedback-No. of unique users who gave
  negative feedback

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Auction Summary Listing
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Items Description Page
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Feedback Profile of Seller
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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 whove traded
  before
• 89.0 conducted just one transaction
• Multiple transaction occurred within a few days
  of each other

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Buyer v/s Seller feedbackSellers tend to be more
experiencedSellers median was 33(score
82)Buyers median was 8
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Of feedback provided by buyers,0.6 were
negative,0.3 neutral and 99.1 positiveSellers
were less happy(most common complaintwinning
bidder didnt follow through)
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Affect of Prior Feedback on Future Performance

• Negative feedback less frequently directed to
  experienced sellers.

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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

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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.

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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.

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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 sellers 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.

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Conclusion

• Significant volume of feedback(median seller
  score33) 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.