The Nature and Role of Feedback Text Comments in Online Marketplaces: Implications for Trust Building, Price Premiums, and Seller Differentiation

TLDR

Online marketplaces rely on reputation systems to differentiate sellers and generate price premiums, yet prior research has focused only on numeric ratings while overlooking the potentially richer information conveyed by feedback text comments. This study investigates how feedback text comments build buyer trust in sellers’ benevolence and credibility and thereby influence price premiums. Using content analysis of over 10,000 public feedback comments from 420 eBay sellers and corresponding buyer transaction data, the authors quantify the relationship between comment content and price premiums. The analysis shows that extraordinary seller behavior highlighted in text comments generates price premiums by fostering buyer trust, with text-based benevolence explaining 50% of premium variance—more than the 20–30% explained by numeric ratings alone—demonstrating the economic value of feedback text.

Abstract

For online marketplaces to succeed and prevent a market of lemons, their feedback mechanism (reputation system) must differentiate among sellers and create price premiums for trustworthy sellers as returns to their reputation. However, the literature has solely focused on numerical (positive and negative) feedback ratings, alas ignoring the role of feedback text comments. These text comments are proposed to convey useful reputation information about a seller’s prior transactions that cannot be fully captured with crude numerical ratings. Building on the economics and trust literatures, this study examines the rich content of feedback text comments and their role in building a buyer’s trust in a seller’s benevolence and credibility. In turn, benevolence and credibility are proposed to differentiate among sellers by influencing the price premiums that a seller receives from buyers. This paper utilizes content analysis to quantify over 10,000 publicly available feedback text comments of 420 sellers in eBay’s online auction marketplace, and to match them with primary data from 420 buyers that recently transacted with these 420 sellers. These dyadic data show that evidence of extraordinary past seller behavior contained in the sellers’ feedback text comments creates price premiums for reputable sellers by engendering buyer’s trust in the sellers’ benevolence and credibility (controlling for the impact of numerical ratings). The addition of text comments and benevolence helps explain a greater variance in price premiums (R 2 = 50%) compared to the existing literature (R 2 = 20%–30%). By showing the economic value of feedback text comments through trust in a seller’s benevolence and credibility, this study helps explain the success of online marketplaces that primarily rely on the text comments (versus crude numerical ratings) to differentiate among sellers and prevent a market of lemon sellers. By integrating the economics and trust literatures, the paper has theoretical and practical implications for better understanding the nature and role of feedback mechanisms, trust building, price premiums, and seller differentiation in online marketplaces.