Designing Online Marketplaces: Trust and Reputation Mechanisms
Chapter in NBER book Innovation Policy and the Economy, Volume 17 (2017), Shane Greenstein, Josh Lerner, and Scott Stern, editors (p. 77 - 93)
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.
Document Object Identifier (DOI): 10.1086/688845This chapter first appeared as NBER working paper w22616, Designing Online Marketplaces: Trust and Reputation Mechanisms, Michael Luca
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