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Non‐Neutral and Asymmetric Effects of Neutral Ratings: Evidence From eBay
Author(s) -
Rabby Faisal,
Shahriar Quazi
Publication year - 2016
Publication title -
managerial and decision economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.288
H-Index - 51
eISSN - 1099-1468
pISSN - 0143-6570
DOI - 10.1002/mde.2696
Subject(s) - value (mathematics) , sort , adverse selection , revenue , risk neutral , business , advertising , microeconomics , economics , statistics , computer science , mathematics , database , accounting
Seller ratings help overcome adverse selection problems in online transactions between strangers. Using eBay data, we find that auction outcomes are sensitive toward not only positive and negative seller ratings but also neutral ratings. We find that (1) buyers utilize neutral ratings to sort among otherwise identical sellers and value their products and (2) contrary to eBay's opinion, depending on whether a seller is top‐notch or not, neutral ratings can be detrimental or beneficial; for sellers with higher proportions of positive ratings, an increase in neutral ratings decreases sales. For sellers with higher proportion of negative ratings, an increase in neutral ratings increases both sales and revenue. Copyright © 2014 John Wiley & Sons, Ltd.