Online reputation in eBay auctions

Research on online reputation systems has shown that, in general, a higher reputation score increases trust in the seller in the sense that those with a higher reputation score get better prices for their goods (the “reputation premium”) and may be more likely to attract buyers (a higher probability of a sale). Likewise, negative feedback from buyers reduces trust in the seller. In this chapter, we analyze whether and how sellers who are confronted with negative feedback can rebuild trust by reacting appropriately.We also assess the monetary value of textual feedback, as compared to the value of the numerical reputation score. Data obtained in an online choice-based experiment allows us to analyze both the effects of buyers’ feedback text comments on the trust of a buyer in eBay sellers and the effect of a seller’s textual reaction on rebuilding trust. Our results show that textual feedback from buyers can indeed strongly affect the purchasing decisions of other buyers. Sellers can counteract the effect of negative comments, but only when the appropriate trust-rebuilding strategy is chosen in formulating the reply. The monetary value of adequate textual feedback is surprisingly high when compared to the value of the reputation score.