The value of reputation in electronic marketplaces

Abstract

Purpose The purpose of this study is to examine the role of customer experience moderating the relationship between reputation (online consumer reviews) and price premium. Design/methodology/approach This paper collected half-year period transaction of Nokia 5230XM and Kingston SD card from Taobao.com, the largest e-commerce platform in China. This paper combined theoretical analysis and empirical analysis together. Two-stage regression and logistic regression analysis was applied in this empirical analysis. The sensitivity analyses (robustness check) were also conducted in this paper. Findings Customer experience negatively moderates reputation price premium; thus, the positive effect of the reputation system is weaker for the experienced customer than for the naïve customer. Customers with more experience are less likely to pay the price premium and rely on a reputation system. Practical implications The results help sellers to strategize in the online marketplace. Sellers that wish to compete in the e-market must understand the type of customers they are addressing and differentiate the way they treat customers based on the level of customer experience. Originality/value This research contributes to the reputation management and customer behavior literature by identifying the effects of customer experience on the relationship between the reputation system and price premium. The results address the conflicts found in previous studies by extending the explanation of the negative reputation price premium.