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Private Ordering on the Internet: The eBay Community of Traders

Published online by Cambridge University Press:  20 January 2017

David P. Baron
David P. Baron*
Affiliation:
Stanford University
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Abstract

eBay provides an online auction venue for remote and anonymous members of its online community to realize gains from trade. As a venue it never sees the items sold, verifies the item listings, handles settlements, or represents the buyer or seller. Despite the associated market imperfections and incentive problems, over five million auctions are active on an average day. Trading is based on trust among members of the eBay community, and trust is supported by a multilateral reputation mechanism based on member feedback. eBay supplements the reputation mechanism with rules and policies that mitigate incentive problems, reduce transactions costs, and support trust among members and between members and the company. Reputations and the rules and policies provide a private ordering of eBay's community. This paper examines this private ordering in the context of the company's strategy and in the shadow of the public order.

Type
Research Article
Information
Business and Politics , Volume 4 , Issue 3 , November 2002 , pp. 245 - 274
Copyright
Copyright © V.K. Aggarwal 2002 and published under exclusive license to Cambridge University Press 

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