Does Reputation Really Signal Potential Success in Online Marketplaces, or is IT only a Trigger?

The implicit assumption in online marketplaces is that reputation, registered as the average of previous ratings, represents a market opinion of the trustworthiness of a business party and that this predicts eventual satisfaction with the expected outcome of the transaction. Extensive research indeed shows that such reputation does result in a higher probability of the seller being chosen in both services and goods markets, presumably because buyers believe that higher rating sellers have a better probability of delivering. Whether reputation actually predicts successful completion of the project and payment, rather than bid choice, however, is an unknown. This study answers that question. The data show that only when the rating value is above 5.5, which is rounded up in the market presentation to a caption of “above average”, is there a significant relationship between previous rating of the seller and eventual payment.