Reputation and Pricing on the e-Market: Evidence from a Major French Platform

Abstract

We use administrative data from a major French e-commerce website to conduct an empirical analysis of the effect on posted prices of seller reputation, as measured by average buyer feedback. We derive a structural price equation which we take to transaction data for four separate categories of goods: books, CDs, video games and DVDs. We address two identification issues: seller/product heterogeneity and the weak exogeneity of reputation (current prices affect future reputation through the feedback rating obtained following the current transaction). Our results show that these two issues may generate a large bias in the estimation of the effect of reputation on prices. We find that this effect is significant, positive, non-linear and, depending on the product category, substantial.