Trust Among Strangers in Internet Transactions:
Empirical Analysis of eBay’s Reputation System
Paul Resnick, presnick@umich.edu∗
Richard Zeckhauser, richard_zeckhauser@harvard.edu
Abstract
Reputations that are transmitted from person to person can deter moral hazard and
discourage entry by bad types in markets where players repeat transactions but rarely
with the same player. On the Internet, information about past transactions may be both
limited and potentially unreliable, but it can be distributed far more systematically than
the informal gossip among friends that characterizes conventional marketplaces.
One of the earliest and best known Internet reputation systems is run by eBay, which
gathers comments from buyers and sellers about each other after each transaction.
Examination of a large data set from 1999 reveals several interesting features of this
system, which facilitates many millions of sales each month. First, despite incentives to
free ride, feedback was provided more than half the time. Second, well beyond
reasonable expectation, it was almost always positive. Third, reputation profiles were
predictive of future performance. However, the net feedback scores that eBay displays
encourages Pollyanna assessments of reputations, and is far from the best predictor
available. Fourth, although sellers with better reputations were more likely to sell their
items, they enjoyed no boost in price, at least for the two sets of items that we examined.
Fifth, there was a high correlation between buyer and seller feedback, suggesting that the
players reciprocate and retaliate.