Seller Reputation: From Word-of-Mouth to Centralized Feedback

Hongbin Cai, Ginger Jin, Li-an Zhou and Chong Liu, International Journal of Industrial Organization 34, 51-65, May .


Reputation is one of the most important incentives for trade and cooperation. Using the complete selling history of 125,135 sellers on (an eBay equivalent in China), we show that sellers with a longer successful selling record enjoyed more repeat business, reached more buyer regions, sold in more product categories, and had a higher completion rate even before Eachnet introduced a centralized feedback system. Since the centralized feedback system, the difference between reputable and non-reputable sellers has decreased in terms of repeat business but enlarged in terms of market expansion. These findings suggest that while reputation can facilitate trade through buyer experience and word-of-mouth, it is not as effective as centralized feedback. Our study also shows that, although completion rate and transaction price are the two outcomes most often examined in the literature, seller reputation is important for buyer clientele, market reach, business scope and market survival.

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