Time For a New Beginning

In order to ensure the continuing expansion and success of electronic commerce, the issue of how to assess product quality of items sold over the Internet must be addressed. The formal literature of microeconomics presents a conceptual framework for this assessment that is applied in the case study presented in this paper. The type of transaction studied is online auction transactions conducted through the popular web site, eBay. Quality issues, as well as other sources of buyer dissatisfaction with electronic purchases, are addressed on eBay through a bulletin board style feedback system by which members of the eBay community may report on various aspects of their eBay transactions. eBay publishes the feedback ratings of each seller as a part of its listing of any item for sale and also disciplines sellers that accumulate too much negative feedback. This would seem to provide buyers with some degree of protection from sellers who are unscrupulous in their claims regarding product quality. The empirical work presented here examines the effectiveness of this system using logistic and ordinary least squares regression, and concludes that at least key aspects of the system offer adequate incentives to sellers to provide accurate representations to buyers regarding the quality of their merchandise.