METU Department of Economics Seminar Series (April 4th)
MIDDLE EAST TECHNICAL UNIVERSITY
Department of Economics Seminar Series
"Seller Reputation with an Imperfect Review System"
I model the transactions that take place in an electronic marketplace where both adverse selection and moral hazard problems are present. A built-in review system is employed within the platform to ease the information problem and provide an incentive for the seller through reputation. The transactions with satisfied and unsatisfied consumers receive reviews with possibly distinct probabilities. These probabilities affect the type of Perfect Bayesian Equilibrium and the effort provided by the seller. I show that when the price is fixed, an increase in the likelihood of receiving a review from satisfied consumers does not decrease the seller's effort, and increase profit. By contrast, an increase in the likelihood of receiving a review from unsatisfied consumers may result in lower profit and higher seller effort. Hence the seller may have an incentive to censor negative reviews. Under endogenous price, the seller effort is continuous and non-monotonous in both parameters of the review system.
(Universitat Autònoma de Barcelona)
Date: April 4, 2022 (Monday)
Synchronous Online Seminar
Meeting ID: 962 6861 4522