Essays on Trade, Trust, and Information Technology

Download or read book Essays on Trade, Trust, and Information Technology written by Xiang Hui and published by . This book was released on 2016 with total page 104 pages. Available in PDF, EPUB and Kindle. Book excerpt: In Chapter 2, we focus on a trust policy that mitigates inefficiencies arising from asymmetric information. Traditionally, some markets rely on government interventions, while others rely on reputation systems, warranties, or guarantees. This paper explores the impact of two mechanisms, namely reputation badges and buyer protection programs, and their interaction on eBay's marketplace. Adding buyer protection reduces the premium for the reputation badge and increases efficiency in the marketplace. These efficiency gains are achieved by reducing moral hazard through an increase in sellers' quality and by reducing adverse selection through a higher exit rate for low-quality sellers. Our estimates suggest buyer protection increases the total welfare by 2.9%.