In-Depth Analysis of the Seller Reputation and Price Premium Relationship: A Comparison between Ebay Us and Taobao China

Abstract

Seller reputation is recognized as an essential determinant in online C2C marketplaces, but its influence on price premium remains unknown. The majority of existing studies indicate that seller reputation is positively correlated with sales price (price premium) on eBay US, but not on Taobao China. Conversely, the strong correlation between seller reputation and sales volume found on Taobao (volume effect) seldom occurs on eBay US. Seller reputation thus seems having a positive impact on sales price on eBay US but a positive impact on sales volume on Taobao. To explain this interesting difference, we conducted an in-depth analysis using data retrieved from eBay US and Taobao China, grounded in the economic theory of market structure. The findings suggest that market structure, and specifically the number of sellers, moderates the relationship between seller reputation and sales performance. In a thin market, seller reputation is positively correlated with sales price, whereas in a thick market, the impact of seller reputation is reflected in sales volume.