The Role of Reputation Systems in Reducing On-Line Auction Fraud

Abstract

On-line auction fraud is the most frequently reported Internet crime. This research investigates whether on-line reputation systems are a useful mechanism for potential buyers to avoid fraudulent auctions. Content analysis of complaints posted in an on-line auction reputation system is used to improve understanding of on-line auction fraud and the role of reputation systems in documenting, predicting, and reducing fraud. The results show (1) that the number of fraud allegations found in an on-line reputation system significantly exceeds the number of fraud allegations made through official channels, (2) that recent negative feedback posted in an on-line reputation system is useful in predicting future on-line auction fraud, and (3) that experienced on-line auction buyers are in a better position to use reputation system data to avoid potentially fraudulent auctions.