On the efficacy of imperfect public-monitoring of seller reputation in e-commerce

Reputation is crucial in promoting exchanges in online markets, since it may overcome information inefficiency through successful signals of sellers’ quality to less informed customers. To explore this issue, I study web sellers’ reliability in business-to-consumer online transactions with reference to reputation games. Customers can gather information in online marketplaces like e-Bay through public feedback systems. In contrast, without a centralized reputation system, it is not clear how potential buyers form their beliefs. For the latter case, I provide empirical evidence on perceived reliability and its determinants for some virtual shops operating worldwide in the clothing retail sector.