Reputation, Information And Regulation

Using a large sample of online transaction data from the database of a C2C website, we empirically study reputation, information and regulation in three aspects. We believe that online market is a reprography of the traditional market, which is also the source from which online transaction problems are stemmed. Hence our empirical study on online market helps us to understand the related questions in traditional economy.Chapter 2 focuses on the relations between reputation and regulation. Reputation and regulation which have interactive effect on each other are two principal mechanisms to sustain an effective market. Using online transaction data, we empirically study the effectiveness and efficiency of reputation within different regulation regimes. We succeed in identifying the substitute and complement effect between reputation and regulation in our regression results. Necessary regulation is indispensable for a reputation system to take effect. But marginal increase of regulation might reduce the efficiency of reputation, which can be interpreted as the substitute of"trust based on system"for"trust based on reputation."Our findings bring evidence for us to understand the relationship between reputation and regulation better.Chapter 3 studies Buy-price Auction in a new angle of view. There is a special type of auction named Buy-price Auction in online market that is beyond the understanding of the classical auction theories. Economists tried to explain the phenomenon with risk aversion and transaction cost. They succeeded in some extent, except for the cross sectional variation of adoption rate of buy price. Using a large sample of online transactions, this paper tests previous theories, which indicate that risk aversion and transaction cost really matter in this case. But after they are controlled, seller's reputation still has a significant effect on the decision of a seller whether to set a buy price in his online auction and that of a buyer facing a buy-price auction whether to execute the buy price. Buy price also has a significant reference effect for the buyer to valuate of the article, the scale of which positively correlates with the seller's reputation. Then we get the evidence to understand buy price as an information and reputation mechanism in a buy-price auctions.In Chapter 4, we identify a frequent behavior of the online trader during his process of accumulating reputation scores, which is named by"seller's purchase"for convenience."Seller's purchase"is kind of"gaming the rule"rather than cheating. According to eachnet.com's rule, the website takes on reputation scores obtained as a buyer the same as those obtained as a seller, while the former is so easier than the latter that many sellers choose to purchase low-price articles in order to accumulate scores. We manage to analysis the determinant factors of"seller's purchase"using the online transaction data. It is nothing serious if"seller's purchase"is just a regular procession for a green hand seller to start his internet business career, but our further study shows that"seller's purchase"is significantly correlated to cheat or default behavior in future. Based on those findings, we try to discuss the relationship between the quality of information and the effectiveness and efficiency of the reputation remarking system, which implies that transparency of information with little noise is crucial for a reputation system to sustain the market order.