The encyclopedia · Product & Design · Product decision · 2002–2003
eBay's feedback reputation earned a seller about 7.6% more revenue.
A controlled experiment showed a high-reputation eBay seller got roughly 7.6% higher revenue than newcomer identities for identical lots.
eBay
the move
On an anonymous marketplace, buyers decide whether to pay a seller they have never met and may never see again, so trust is the binding constraint on trade.
eBay built a feedback mechanism where each party rates the other, publishing cumulative scores and comments that travel with a seller's identity.
To test whether this reputation actually paid, researchers sold identical postcard lots from a high-reputation seller and from new identities, and found the established seller reaped about 7.6% more revenue on average, a result significant with p=0.0346.
why it works
- Feedback is cumulative and public, so it withstands a single transaction
- Rating both parties means misbehaviour is punished for buyer and seller alike
- A portable score lets reputation accrue to an identity rather than one listing
- The measured premium shows buyers are willing to pay for the assurance reputation substitutes for
what transfers
When goods are standard but trust is the real product, a verifiable public track record is the asset that converts strangers into buyers.
what came after
Reputation and feedback systems became a defining feature of online marketplaces and a major subject of research. The experiment also revealed limits, such as how reputation matters more for some items and how sellers can shed negative history by starting new identities, which platforms have since tried to counter.
references
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