The Retaliatory Feedback Problem: Evidence from eBay and a Proposed Solution

The Retaliatory Feedback Problem: Evidence from eBay and a Proposed Solution

Ross A. Malaga (Montclair State University, USA)
DOI: 10.4018/978-1-60566-040-0.ch019
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Abstract

Online auctions are an increasingly popular avenue for completing electronic transactions. Many online auction sites use some type of reputation (feedback) system—where parties to a transaction can rate each other. However, retaliatory feedback threatens to undermine these systems. Retaliatory feedback occurs when one party in a transaction believes that the other party will leave them a negative feedback if they do the same. This chapter examines data gathered from E-Bay in order to show that retaliatory feedback exists and to categorize the problem. A simple solution to the retaliatory feedback problem—feedback escrow—is described.
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Introduction

The past few years have seen the explosive growth of online auction transactions. In 2005, E-Bay listed 1.9 billion items for auction, representing a 33% increase over the previous year. Those listing were responsible for $44 billion in transactions (a 29.6%) increase over 2004 (E-Bay, 2006). While E-Bay is the major player in this area, it is not the only one. Many other companies, such as Amazon, Yahoo, and Overstock, offer consumer-to-consumer (C2C) online auctions.

While online auction sites are an increasingly popular avenue for completing electronic transactions, they are characterized by a high degree of uncertainty. They face what Akerlof (1970) calls a “Lemons” market; that is, they have a high amount of uncertainty about the quality of the information and/or goods. Uncertainty primarily derives from the fact that buyers and sellers typically know little about each other, are involved in one-time transactions, and pictures and descriptions of goods provide the only means for assessing the quality of goods available for bidding (Montano, Porter, Malaga, & Ord, 2005). This lack of information available to auction bidders, termed information asymmetry, leads to a higher level of uncertainty about potential outcomes from an auction transaction than if a bidder were able to learn more about the auction seller and his product prior to bidding (Liang & Huang, 1998).

In order to reduce information asymmetry and increase the level of trust between auction participants, reputation systems have been developed. Wilson (1985, pp. 27-28) states, “in common usage, reputation is a characteristic or attribute ascribed to one person, industry, and so forth, by another (e.g., A has a reputation for courtesy).” This is typically represented as a prediction about likely future behavior (e.g., “A is likely to be courteous”). It is, however, primarily an empirical statement (e.g., “A has been observed in the past to be courteous”). The predictive power of reputation depends on the supposition that past behavior is indicative of future behavior. Reputation systems (sometimes called feedback systems) allow the participants in a transaction to rate each other. Individuals’ ratings are aggregated and are available for everyone to see. These systems promote trust between buyers and sellers because they serve as a benchmark for seller reliability. Trust has been shown to serve as a key factor in the success of online transactions, including electronic auctions (Brynjolfsson & Smith, 2000; Resnick, Zeckhauser, Friedman, & Kuwabara, 2000; Hoffman & Novak, 1999).

This chapter proceeds as follows. The next section discusses the existing literature on trust and reputations systems. Following that, the retaliatory feedback problem is further defined. The research methodology is then discussed. Finally, future trends and conclusions are detailed.

Complete Chapter List

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Table of Contents
Foreword
Richard Baskerville
Preface
Aileen Cater-Steel, Latif Al-Hakim
Acknowledgment
Chapter 1
Panagiotis Kanellis, Thanos Papadopoulos
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Conducting Research in Information Systems: An Epistemological Journey
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Chapter 2
Francis Chia Cua, Tony C. Garrett
This chapter introduces ontological and epistemological elements in information systems research. It argues that ontology, epistemology, and... Sample PDF
Understanding Ontology and Epistemology in Information Systems Research
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Chapter 3
John Loonam, Joe McDonagh
Enterprise systems (ES) promise to integrate all information flowing across the organisation. They claim to lay redundant many of the integration... Sample PDF
A Grounded Theory Study of Enterprise Systems Implementation: Lessons Learned from the Irish Health Services
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Chapter 4
Khalid Al-Mabrouk
This chapter reviews some of the existing Information Technology Transfer (ITT) literature and suggests that it has fallen victim to the well-known... Sample PDF
A Critical Theory Approach to Information Technology Transfer to the Developing World and a Critique of Maintained Assumptions in the Literature
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Chapter 5
João Porto de Albuquerque, Edouard J. Simon, Jan-Hendrik Wahoff, Arno Rolf
Research in the Information Systems (IS) field has been characterised by the use of a variety of methods and theoretical underpinnings. This fact... Sample PDF
The Challenge of Transdisciplinarity in Information Systems Research: Towards an Integrative Platform
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Chapter 6
Paul D. Witman
This chapter provides a set of guidelines to assist information systems researchers in creating, negotiating, and reviewing nondisclosure... Sample PDF
A Guide to Non-Disclosure Agreements for Researchers Using Public and Private Sector Sources
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Chapter 7
Slinger Jansen
Even though information systems is a maturing research area, information systems case study reports generally lack extensive method descriptions... Sample PDF
Applied Multi-Case Research in a Mixed-Method Research Project: Customer Configuration Updating Improvement
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Chapter 8
Erja Mustonen-Ollila, Jukka Heikkonen
This chapter gives important methodological, theoretical, and practical guidelines to the information system (IS) researchers to carry out a... Sample PDF
Historical Research in Information System Field: From Data Collection to Theory Creation
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Chapter 9
Paivi Ovaska
Large-scale systems development is a complex activity involving number of dependencies that people working together face. Only a few studies... Sample PDF
A Multi-Methodological Approach to Study Systems Development in a Software Organization
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Chapter 10
Judith Symonds
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Usability Evaluation Meets Design: The Case of bisco Office™
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Chapter 11
Ivan Ka-Wai Lai, Joseph M. Mula
Soft Systems Methodology (SSM) has been employed to increase the effectiveness of organizational requirement analysis in Information Systems (IS)... Sample PDF
An Analysis-Form of Soft Systems Methodology for Information Systems Maintenance
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Chapter 12
Raul Valverde, Mark Toleman, Aileen Cater-Steel
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Design Science: A Case Study in Information Systems Re-Engineering
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Chapter 13
Shaligram Pokharel
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Chapter 14
William Yeoh
Engineering asset management organisations (EAMOs) are increasingly motivated to implement business intelligence (BI) systems in response to... Sample PDF
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Chapter 15
Ping Li, Joseph M. Mula
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Electronic Data Interchange (EDI) Adoption: A Study of SMEs in Singapore
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Chapter 16
Hatem F. Halaoui
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Chapter 17
Sergio Di Martino, Filomena Ferrucci, Carmine Gravino
Web technologies are being even more adopted for the development of public and private applications, due to the many intrinsic advantages. Due to... Sample PDF
Empirical Studies for Web Effort Estimation
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Chapter 18
Mobile Marketing  (pages 328-341)
Kazuhiro Takeyasu
Recently, cellular phones capable of accessing the Internet are prevailing rapidly in Japan. First, their functions and features are examined... Sample PDF
Mobile Marketing
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Chapter 19
Ross A. Malaga
Online auctions are an increasingly popular avenue for completing electronic transactions. Many online auction sites use some type of reputation... Sample PDF
The Retaliatory Feedback Problem: Evidence from eBay and a Proposed Solution
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