eBay’s Reputation System

1. eBay’s Reputation System PoojaKailay

2. 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

3. 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

4. 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

5. Auction Summary Listing

6. Item’s Description Page

7. Feedback Profile of Seller

8. 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

9. Buyer v/s Seller feedbackSellers tend to be more experiencedSellers’ median was 33(score 82)Buyers’ median was 8

10. 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)

12. Affect of Prior Feedback on Future Performance • Negative feedback less frequently directed to experienced sellers.

13. 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

14. 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.

15. 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.

16. 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.

17. 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.