Some eBay users are artificially boosting their reputations by buying and selling feedback on the Internet auction site, according to John Morgan, a professor at the University of California, Berkeley's Haas School of Business.
"eBay harbors an active market for feedback, where users can buy a compliment to artificially boost their feedback status," Morgan explains. "Users enter this market to leverage their gains in reputation to get higher prices for other, presumably larger, transactions."
Morgan and co-author Jennifer Brown, a UC Berkeley Department of Agricultural and Resource Economics doctoral student, detailed the abuse on eBay in an article titled "Reputation in Online Auctions: The Market for Trust" in the latest issue (Fall 2006) of the journal California Management Review.
Under eBay's reputation system, buyers and sellers can submit feedback to each other at the conclusion of each transaction. The feedback consists of a rating such as positive, neutral, or negative and a brief description of the quality of the transaction. The transaction is bilateral, meaning that both buyers and sellers exchange feedback - and can thus increase their own feedback ratings - through a transaction.
Between June to December 2005, 526 sellers posted 6,526 unique feedback listings for low-priced or seemingly valueless items, whose sales appeared to be designed only to artificially enhance feedback ratings, Morgan and Brown found. Seventy-six percent of the listings, or 5,127 items, resulted in a sale. A follow-up study revealed the market for feedback remained active in 2006, with 398 feedback listings counted from April 25 through May 30.
Morgan and Brown noted that more than 80 percent of the listings studied in 2005 and nearly 88 percent of the 2006 listings had a Buy-It-Now option and a price of one penny. With the Buy-It-Now option, a seller sets a fixed price and no bidding auction occurs for a sale. A Buy-It-Now sale for a penny automatically results in the seller losing 29 cents because eBay charges a 25-cent listing fee and 5 cents for the Buy-It-Now option.