nep-ict New Economics Papers
on Information and Communication Technologies
Issue of 2013‒09‒06
two papers chosen by
Walter Frisch
University Vienna

  1. Losing to Win: Reputation Management of Online Sellers By Mo Xiao; Jiandong Ju; Ying Fan
  2. Learning and Adaptation as a Source of Market Failure By David Goldbaum

  1. By: Mo Xiao (University of Arizona); Jiandong Ju (Tsinghua University); Ying Fan (University of Michigan)
    Abstract: Reputation is generally considered an asset, especially in e-commerce markets. Any reputation system, however, elicits strategic responses from the sellers. Using panel data on a large random sample of online sellers from China’s largest e-commerce platform,, we study how reputation affects revenue, prices, transaction volume, and survival likelihood as well as how sellers manage their reputation. We find that seller reputation has a substantial positive impact on established sellers, but new sellers fail to reap such benefits. Pursuing the long-run returns to reputation, new sellers actively manage their reputation by engaging in costly activities such as sales and switching product categories. In this “losing to win†process, new sellers may have spent too much resource to survive to next stage. Our results provide empirical support for the theory of career concern and reputation dynamics.
    Date: 2013
  2. By: David Goldbaum (Economics Discipline Group, University of Technology, Sydney)
    Abstract: In the developed model, without knowing the trading strategies of the other traders in a financial market, traders cannot derive a rational expectations equilibrium. In a dynamic setting, market participants employ learning and adaptation to develop trading strategies to accommodate for this information deficiency. Model-consistent use of market-based information generally improves price performance. It can also produce episodes of extreme sudden mispricing despite model generated historical support for its use. Simulations examine the impact of information constraints and bounded rationality on general price efficiency and sudden market mispricing.
    Keywords: Heterogeneous Agents; Efficient Markets; Learning; Dynamics; Computational Economics; Market Failure
    JEL: G14 C62 D82
    Date: 2013–08–01

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