The effect of buyer feedback scores on internet auction prices

One of the major roles of Internet intermediaries is to help build trust between buyers and sellers for efficient and safe transactions. The buyer feedback system started in online auctions as one of the trust‐building mechanisms on the Internet. As the buyer feedback system is becoming a standard trust‐building mechanism in other e‐commerce sites as well as in online auction, there is an increasing interest about the impact of the buyer feedback system. On the top of recent studies investigating the effects of buyer feedback scores on auction prices, we provide empirical validations using more sophisticated methods. In this study, we tested the relationship between buyer feedback scores and bidding prices using an empirical data set from a leading consumer‐to‐consumer (C2C) Internet auction site. Data analysis results show a strong empirical validation of previous studies. Negative feedback is a significant price discount factor in the final auction price on the C2C Internet auction market. The results also show that potential buyers are more sensitive to negative feedback when they are considering buying inherently risky products such as used or refurbished products.

[1]  J. Brockner,et al.  When Trust Matters: The Moderating Effect of Outcome Favorability , 1997 .

[2]  Chrysanthos Dellarocas,et al.  Mechanisms for coping with unfair ratings and discriminatory behavior in online reputation reporting systems , 2000, ICIS.

[3]  R. Kauffman,et al.  Running up the Bid: Modeling Seller Opportunism in Internet Auctions , 2000 .

[4]  John M. Olin,et al.  Information Dispersion and Auction Prices , 2005 .

[5]  Cynthia G. McDonald,et al.  Reputation in an Internet Auction Market , 2002 .

[6]  P. Ring,et al.  Structuring cooperative relationships between organizations , 1992 .

[7]  David H. Reiley,et al.  Pennies from Ebay: The Determinants of Price in Online Auctions , 2000 .

[8]  J. H. Davis,et al.  An Integrative Model Of Organizational Trust , 1995 .

[9]  R. Lutz.  Changing Brand Attitudes through Modification of Cognitive Structure , 1975 .

[10]  Stephen S. Standifird.  Reputation and e-commerce: eBay auctions and the asymmetrical impact of positive and negative ratings , 2001 .

[11]  James A. Narus,et al.  A Model of Distributor Firm and Manufacturer Firm Working Partnerships , 1990 .

[12]  Sirkka L. Jarvenpaa,et al.  Perils of Internet fraud: an empirical investigation of deception and trust with experienced Internet consumers , 2000, IEEE Trans. Syst. Man Cybern. Part A.

[13]  David H. Eaton.  Valuing Information : Evidence from Guitar Auctions on , 2002 .

[14]  Paul A. Pavlou,et al.  Evidence of the Effect of Trust Building Technology in Electronic Markets: Price Premiums and Buyer Behavior , 2002, MIS Q..

[15]  Sirkka L. Jarvenpaa,et al.  Is Anybody Out There? Antecedents of Trust in Global Virtual Teams , 1998, J. Manag. Inf. Syst..

[16]  Paul Resnick,et al.  Reputation systems , 2000, CACM.

[17]  J. Lewis,et al.  Trust as a Social Reality , 1985 .

[18]  Il Im,et al.  An analysis of online customer complaints: implications for Web complaint management , 2002, Proceedings of the 35th Annual Hawaii International Conference on System Sciences.

[19]  Ginger Zhe Jin,et al.  Blind Trust Online: Experimental Evidence from Baseball Cards , 2002 .

[20]  Paul A. Pavlou,et al.  Does Online Reputation Matter? An Empirical Investigation of Reputation and Trust in Online Auction Markets , 2000 .

[21]  Bart J. Bronnenberg,et al.  Exploring the implications of the internet for consumer marketing , 1997 .

[22]  Daniel J. McAllister.  Affect- and Cognition-Based Trust as Foundations for Interpersonal Cooperation in Organizations , 1995 .

[23]  Ali Hortaçsu,et al.  Winner's Curse, Reserve Prices and Endogenous Entry: Empirical Insights from Ebay Auctions , 2003 .

[24]  N. L. Chervany,et al.  Initial Trust Formation in New Organizational Relationships , 1998 .

[25]  Andrew B. Whinston,et al.  Building trust in the electronic market through an economic incentive mechanism , 1999, ICIS.

[26]  N. L. Chervany,et al.  What is Trust? A Conceptual Analysis and an Interdisciplinary Model , 2000 .

[27]  Mick Silver,et al.  Estimating the Worth of Product Characteristics , 1997 .

[28]  J. Livingston.  How Valuable Is a Good Reputation? A Sample Selection Model of Internet Auctions , 2005, Review of Economics and Statistics.

[29]  J. Wooders,et al.  Reputation in Auctions: Theory, and Evidence from Ebay , 2006 .