Abstract
Live chatting tools have emerged as a new channel for sellers and buyers to communicate with each other. Live chats facilitate human-based interactions to reduce information asymmetry and build trust between sellers and buyers, exhibiting great potential to complement the existing feedback system used in online marketplaces. This paper analyzes the context of Alibaba where live chatting tools are offered by the platform to every seller. We use clickstream data of 3000 customers’ page viewing, live chatting, and purchasing activities to investigate the role played by live chats in online marketplaces. We find that 1) live chats positively impact repeat visits for sellers with low reputation; 2) live chats improve conversion rates; 3) live chats improve conversion more effectively for sellers with low reputation; and 4) people are more likely to initiate live chats when they face sellers with low reputation or products with few reviews. These findings indicate that live chats can work as substitutes for reputation.
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