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Adverse Selection and Moral Hazard in Anonymous Markets

Author

Listed:
  • Klein, T.J.

    (Tilburg University, School of Economics and Management)

  • Lambertz, C.
  • Stahl, K.

Abstract

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.
(This abstract was borrowed from another version of this item.)
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Klein, T.J. & Lambertz, C. & Stahl, K., 2013. "Adverse Selection and Moral Hazard in Anonymous Markets," Other publications TiSEM 4af58dc6-ea0d-4db1-a6ef-f, Tilburg University, School of Economics and Management.
    • Handle: RePEc:tiu:tiutis:4af58dc6-ea0d-4db1-a6ef-f824e3a35d4c
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    File URL: https://pure.uvt.nl/ws/portalfiles/portal/1521115/2013-032.pdf
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    References listed on IDEAS

    as
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    Cited by:

    1. Jolivet, Grégory & Jullien, Bruno & Postel-Vinay, Fabien, 2016. "Reputation and prices on the e-market: Evidence from a major French platform," International Journal of Industrial Organization, Elsevier, vol. 45(C), pages 59-75.
    2. Chris Nosko & Steven Tadelis, 2015. "The Limits of Reputation in Platform Markets: An Empirical Analysis and Field Experiment," NBER Working Papers 20830, National Bureau of Economic Research, Inc.

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    More about this item

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality

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