Good bargains and reputable sellers - An experimental investigation of electronic feedback systems

Electronic reputation mechanisms aim at signaling the quality of traders and at hampering misbehavior. When a buyer rates a seller, the main aspect to keep into account should be the consistency between the good’s advertised characteristics and the actual good itself. On the other hand, the buyer’s satisfaction may also be related to the surplus stemming from the transaction, i.e. whether or not the purchase was a good bargain. This constitutes a possible source of distortion in the way sellers are rated. Using an experimental investigation, we find that the transaction payoff is in fact a significant factor driving the feedback. Conversely, the match (or mismatch) between the ex-ante advertised description and the item received is comparatively less important, and may be offset by the effect of the payoff. This result accounts for the occurrence on some e-marketplace contexts of sellers getting away with inflated descriptions of the goods on sale without compromising their reputation.