NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Designing Online Marketplaces: Trust and Reputation Mechanisms

Michael Luca

NBER Working Paper No. 22616
Issued in September 2016
NBER Program(s):Industrial Organization, Law and Economics, Labor Studies, Productivity, Innovation, and Entrepreneurship

Online marketplaces have proliferated over the past decade, creating new markets where none existed. By reducing transaction costs, online marketplaces facilitate transactions that otherwise would not have occurred and enable easier entry of small sellers. One central challenge faced by designers of online marketplaces is how to build enough trust to facilitate transactions between strangers. This paper provides an economist’s toolkit for designing online marketplaces, focusing on trust and reputation mechanisms.

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Document Object Identifier (DOI): 10.3386/w22616

Published: Designing Online Marketplaces: Trust and Reputation Mechanisms, Michael Luca. in Innovation Policy and the Economy, Volume 17, Greenstein, Lerner, and Stern. 2017

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