The Economics of Reputation and Feedback Systems in E-Commerce Marketplaces

Problems of bias in feedback systems and other possible shortcomings are presented, along with ways to augment their effectiveness and directions for future research and development are presented.

Abstract

The growth of online electronic commerce in general, and of marketplaces in particular, is attributed not only to their ease of use but also to the fact that they provide reputation and feedback systems that help marketplace platforms create trust. The objective of this article is to introduce the reader to the simple economics behind the role of feedback systems, and offer a broad overview of how reputation and feedback systems support e-commerce in online marketplaces. Problems of bias in feedback systems and other possible shortcomings are presented, along with ways to augment their effectiveness and directions for future research and development.