Effects of a reputation feedback system on an online consumer-to-consumer auction market

Authors:
Jian Yang;Xiaorui Hu;Han Zhang
Affiliations:
Department of Industrial and Manufacturing Engineering, New Jersey Institute of Technology Newark, NJ 07102, United States;John Cook School of Business St. Louis University, St. Louis, MO 63108, United States;College of Management, Georgia Institute of Technology, Atlanta, GA 30332, United States
Venue:
Decision Support Systems
Year:
2007

Citing 7
Cited 12

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Abstract

This research establishes a dynamic game-theoretic model that interprets the mechanism of reputation feedback systems in online consumer-to-consumer (C2C) auction markets. Based on the model, a numerical study is conducted to reveal the effects of feedback systems on auction markets. The study shows that the existence of feedback systems greatly improves the performance of online C2C auction markets: buyers are more willing to trade and gain more benefit from the transactions; sellers' honest behavior is encouraged, as honest sellers' gains are increased and dishonest sellers' gains are reduced. It also offers practical insights on the design of a feedback system: rewarding an honestly-behaving seller is less effective on promoting market performance than punishing a cheating seller.