Self-selection, slipping, salvaging, slacking, and stoning: the impacts of negative feedback at eBay

Analysis of usage history for a large panel of eBay sellers suggests that both seller and buyer behavior change in response to changes in a seller's feedback profile. Sellers are more likely to stop listing items right after receiving a negative feedback. Sellers who continue listing do not seem to improve their performance in order to salvage their reputations. Instead, sellers get more negative feedback after receiving a negative feedback. One reason is that observed negative feedback appears to be symptomatic of a temporary decline in the seller's quality, which is also reflected in other transactions around the same time. Receipt of negative feedback might also cause a decline in seller quality, but we find only weak evidence of that. Empirical evidence does support a second hypothesis, that buyers appear to be more willing to give negative feedback to sellers who have recently received other negative feedback.