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FINANCIAL VALUE OF REPUTATION: EVIDENCE FROM THE eBAY AUCTIONS OF GMAIL INVITATIONS

Authors


  • *I gratefully acknowledge the insightful comments and suggestions from the Editor and two anonymous referees that greatly strengthened the article. For their helpful comments I thank Sugato Bhattacharyya, Marcin Kacperczyk, Gautam Kaul, Lutz Kilian, Uday Rajan, Amit Seru, Sophie Shive, Andrei Simonov and seminar participants at the University of Michigan and the American Economic Association 2010 Meeting in Atlanta. I also thank the staff at the Wharton Research Data Services (WRDS) for granting me a special permission to test the spider programs on their server. The usual disclaimer applies.

Abstract

In this article, I utilize a unique collection of auctions on eBay to study the influence of seller reputation on auction outcomes. In a market of homogeneous goods with non-enforceable contracts, I find that sellers who improve their reputation by one quintile from the lowest, experience a 6.2% higher probability of sale and a 6.1% hike in valuation after adjusting for truncation bias from failed auctions and explicitly controlling for unobservable seller heterogeneity. This study also shows that in addition to a dimension of reputation universal across different product markets, the product-specific dimension of reputation significantly affects the auction outcomes.

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