Buying Reputation as a Signal of Quality: Evidence from an Online Marketplace

Title: Buying Reputation as a Signal of Quality: Evidence from an Online Marketplace

Speaker：LI Lingfang (Fudan University, Associate Professor)

Host：DAI Yun (Lingnan College, Sun Yat-sen University, Assistant Professor)

Date and Time：November 9, 2018 (14:30-16:00)

Location: Wang Daohan Room, Lingnan Hall

Language: Chinese + English

Abstract:

Seller reputation, generated by buyers leaving feedback, is critical to foster trust in online market- places. We argue that signaling theory predicts that only high quality sellers would reward buyers for truthful feedback, and we explore this scope for signaling using the “reward-for-feedback” mechanism on Alibaba Group’s Taobao marketplace. We find that items with rewards generate sales that are nearly 30% higher and are sold by higher quality sellers, consistent with a signaling equilibrium. The market design implication is that marketplaces can benefit from allowing sellers to use rewards to build reputations and signal their high quality in the process.

The personal website of the Seminar Speaker:

http://www.ivy-li.net/