Seller Reputation, Information Signals, and Prices for Heterogeneous Coins on eBay

Abstract

In online commerce, a buyer cannot directly examine the product and has to trust the seller for the product description and delivery. The reputation of the seller (and other information signals on the quality of the product) can therefore affect the buyer's willingness to pay. However, while the impact of reputation on willingness to pay for homogeneous goods has been examined, its impact on heterogeneous goods (where there is more uncertainty about product quality) is largely unknown. This paper examines the effects of reputation in online auctions, using U.S. silver Morgan dollar coins in “Almost Uncirculated” condition that are sold on eBay. Empirical results indicate that a seller's overall reputation has a positive impact on a buyer's willingness to pay, that negative comments about a seller often have a negative impact, and that these reputational effects increase in importance when there is more uncertainty about the quality of the coin.

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