Tag Archives | reputation

It has been argued that reputation systems in anonymous online markets supersede informal information exchange in their capacity to promote cooperation among traders. We challenge this view and propose that informal communication plays a crucial role in online market governance. Drawing on a comprehensive theoretical framework of learning and control through social embeddedness, we combine rich data on market transactions, trader reputation scores, and textual data in community forum discussions of two large online markets for illegal goods. Our analyses reveal two key insights. First, despite the availability of standardized scores in reputation systems, both traders and market administrators also rely on informal community discussions when exerting social control in online markets. Second, when reputable sellers are suspected of fraudulent behavior, community discussions involving traders and administrators prove swifter at resolving these issues than reputation systems. Our work shows that informal means of information exchange complement and, at times, supplement reputation systems in supporting the governance of large, anonymous marketplaces.

This work is licensed under a Creative Commons Attribution 4.0 International License.