Adverse selection and moral hazard in anonymous markets

Arbeitspapier

We study the effects of improvements in eBay's rating mechanism on seller exit and continuing sellers' behavior. Following a large sample of sellers over time, we exploit the fact that the rating mechanism was changed to reduce strategic bias in buyer rating. That improvement did not lead to increased exit of poorly rated sellers. Yet, buyer valuation of the staying sellers-especially the poorly rated ones-improved significantly. By our preferred interpretation, the latter effect results from increased seller effort; also, when sellers have the choice between exiting (a reduction in adverse selection) and improved behavior (a reduction in moral hazard), then they prefer the latter because of lower cost.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: ZEW Discussion Papers ; No. 13-050

Classification and Topics

• Classification: Wirtschaft ; Search; Learning; Information and Knowledge; Communication; Belief; Unawareness ; Information and Product Quality; Standardization and Compatibility
• Subject: Anonymous markets ; adverse selection ; moral hazard ; reputation building mechanisms

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Klein, Tobias J. ; Lambertz, Christian ; Stahl, Konrad O.
• Event: Veröffentlichung
• (who): Zentrum für Europäische Wirtschaftsforschung (ZEW)
• (where): Mannheim
• (when): 2013

Further information

• Handle: http://hdl.handle.net/10419/80422
• URN: urn:nbn:de:bsz:180-madoc-343424
• Last update: 10.03.2025, 11:42 AM CET