Reputation effects in peer-to-peer online markets: A meta-analysis∗

Abstract

Most online market exchanges are governed by reputation systems, which allow traders to comment on one another’s behavior and attributes with ratings and text messages. These ratings then constitute sellers’ reputations that serve as signals of their trustworthiness and competence. The large body of research investigating the effect of reputation on selling performance has produced mixed results, and there is a lack of consensus on whether the reputation effect exists and what it means. After showing how the reputation effect can be derived from a game-theoretic model, we use meta-analysis to synthesize evidence from 107 studies investigating the reputation effect in peer-to-peer online markets. Our results corroborate the existence of the reputation effect across different operationalizations of seller reputation and selling performance. Our results also show the extent to which the reputation effect varies. We discuss potential explanations for the variation in reputation effects that cannot be attributed to sampling error and thereby point out promising avenues for future research.