The Imapact Of Reputation On Price And Sales On Third-party Online Shopping Platforms

The penetration of Internet has influenced individuals’ consumption behavior a lot, as it attracts more and more people to online shopping. However, when shopping on the internet, consumers would face more information asymmetry and thus undertake more risks. To reduce the influences of information asymmetry, most of third-party online shopping platforms have introduced reputation systems. It increases trust between consumers and sellers, as well as avoids adverse selection. Reputation has been treated as an important signal of product quality, and buyers could identify retailers selling high quality products. Reputation system has been widely recognized as an important way to increase trust and transaction effectiveness. Focusing on two vital factors influencing sellers’ market performance- price and sales, this paper makes an in-depth explanation on the impact of reputation on price and sales.Previous researches do not show a consistent result when exploring the effect of reputation on price and sales using data retrieved from different online shopping platforms. This paper validates those inconsistent conclusions by empirical studies, i.e. the impact of reputation on price and sales did show different effects for the same product across different online platforms. Meanwhile, we propose the moderating effect of market competition on the relationship between reputation and price and sales, as the same product faces different market competition in different online markets. The results support the positive effect of reputation on price and sales, and indicate that the increase of competitors would weaken the effect of reputation on price and strengthen the effect of reputation on sales.Considering the dynamic of price, we collected the price data during a period to explore the role of reputation in price strategies. Based on the price data of a new product retrieved from Taobao and Tmall, this paper compares different pricing strategies and price adjusting strategies of sellers with different reputation levels. The result shows that sellers with lower reputation are more likely to adopt penetration strategy, and their price adjusting behavior would be influenced by the price adjustment of higher reputation sellers.Despite prior researches usually treated sales as a continuous variable, this paper considers sales as a count variable, and correspondingly this paper introduced Poisson regression model, negative binomial regression model, and zero-inflated negative binomial regression model to investigate the relationship between reputation and sales. We find that zero-inflated negative binomial model fits the data best, as sales is over dispersion and zero inflated. The results show that reputation does not only influence the sales, but also determines whether one seller’s sale is systematic zero. Moreover, this paper shows although the location of seller would influence the sales, it has a different effect. The geographical area is not a determinant of systematic zeros.This paper suggest traditional cross-sectional regression models will not fit, when using dynamic data of sales. To describe the dynamic relationship between reputation and sales, as well as predict sales better, this paper construct a fixed effect model for reputation and sales using unbalanced panel data. Then, we apply zero inflated negative binomial model with dummy variables to explore the effect of reputation on sales. The results indicate that the dynamic relationship between reputation and sales is still significant, and reputation still plays an important role on systematic zeros’ prediction, though significance reduces.This paper collected data of different products in Taobao and e Bay, as well as seller information, by programming auto-crawling programs. We investigated the effect of reputation on price and sales step by step using SPSS and SAS to analyze data. This paper provides new perspectives and methodologies, and explored the static and dynamic relationship between reputation and price and sales. The results theoretically enrich research methodologies and theories on reputation’s effect on price and reputation’s effect on sales. Also, this paper provides practical implications for sellers in price making decisions and sales prediction.