Buying Reputation as a Signal of Quality: Evidence from an Online Marketplace

Lecture | November 8, 2018 | 13:30-15:00 p.m. | Meeting room 106B, Zhonghui building 

Speaker: Li Ling-fang, Fudan University

ABOUT LI LING-FANG

Li Lingfang, achieving a doctor degree of economics of University of California, Irvine, is the vice professor and tutor of students for doctor degree of School of Management of Fudan University. Her major research field that shows a salient interdisciplinary characteristic is involved with information economics, behavioral economics, management information system and marketing. In recent years, she mainly studies the use of mechanism design of market and the use of behavioral economics for integrating individual preferences and information, so as to make resources arranged reasonably and improve a market’s efficiency. She has guided many programs of Nation Natural Science Foundation of China and has been the leader of sub-projects of key programs of Nation Natural Science Foundation of China. She has issued many papers evaluated anonymously by her, including on the top journal in the field of management Management Science and the Chinese top one Journal of Management Science in China. Her program has been funded by Outstanding Youth Science Foundation of Nation Natural Science Foundation of China. Her paper has been rewarded with the second prize of Excellent achievement award of philosophy and Social Sciences of Shanghai. She has been admitted into the program of Pujiang Talents and that of Dawn Talents.

Abstract:

Seller reputation, generated by buyers leaving feedback, is critical to foster trust in online market- places. We argue that signaling theory predicts that only high quality sellers would reward buyers for truthful feedback, and we explore this scope for signaling using the “reward-for-feedback” mechanism on Alibaba Group’s Taobao marketplace. We find that items with rewards generate sales that are nearly 30% higher and are sold by higher quality sellers, consistent with a signaling equilibrium. The market design implication is that marketplaces can benefit from allowing sellers to use rewards to build reputations and signal their high quality in the process.