DP5693 Last Minute Feedback

Author(s): Tobias Klein, Christian Lambertz, Giancarlo Spagnolo, Konrad O Stahl
Publication Date: June 2006
Keyword(s): eBay, fear of retaliation, informational content, reciprocity, reputation mechanism, strategic feedback behaviour
JEL(s): D44, L15, L86
Programme Areas: Industrial Organization
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=5693

Feedback mechanisms that allow partners to rate each other after a transaction are considered crucial for the success of anonymous internet trading platforms. We document an asymmetry in the feedback behaviour on eBay, propose an explanation based on the micro structure of the feedback mechanism and the time when feedbacks are given, and support this explanation by findings from a large data set. Our analysis implies that the informational content of feedback records is likely to below. The reason for this is that agents appear to leave feedbacks strategically. Negative feedbacks are given late, in the "last minute", or not given at all, because of the fear of retaliative negative feedback. Conversely, positive feedbacks are given early in order to encourage reciprocation. Towards refining our insights into the observed pattern, we look separately at buyers and sellers, and relate the magnitude of the effects to the trading partners' experience.