Charles A. Wood

The Sound of Silence in Online Feedback: Estimating Trading Risks in the Presence of Reporting Bias

Most online feedback mechanisms rely on voluntary reporting of privately observed outcomes. This introduces the potential for reporting bias, a situation where traders exhibit different propensities to report different outcome types to the system. Unless properly accounted for, reporting bias may severely distort the distribution of public feedback relative to the underlying distribution of private transaction outcomes and, thus, hamper the reliability of feedback mechanisms. This study offers a method that allows users of feedback mechanisms where both partners of a bilateral exchange are allowed to report their satisfaction to “see through” the distortions introduced by reporting bias and derive unbiased estimates of the underlying distribution of privately observed outcomes. A key aspect of our method lies in extracting information from the number of transactions where one or both trading partners choose to remain silent. We apply our method to a large data set of eBay feedback. Our results support the widespread belief that eBay traders are more likely to post feedback when satisfied than when dissatisfied and are consistent with the presence of positive and negative reciprocation among eBay traders. Most importantly, our analysis derives unbiased estimates of the risks that are associated with trading on eBay that, we believe, are more realistic than those suggested by a naive interpretation of the unusually high (>99%) levels of positive feedback currently found on that system.

The effects of shilling on final bid prices in online auctions

An increasing number of reports of online auction fraud are of growing concern to auction operators and participants. In this research, we discuss reserve price shilling, where a bidder shills in order to avoid paying auction house fees, rather than to drive up the price of the final bid. We examine the effect that premium bids have upon the final selling price, since they are linked with reserve price shill bids. We use 10,260 eBay auctions during April 2001, and identify 919 auctions involving 322 sellers and 1583 bidders involved in concurrent auctions for the exact same item. We find that premium bidding occurs 23% of the time, in 263 of the 919 auctions. Using a theoretical perspective involving valuation signals, we show that other bidders may view high bids as signals that an item is worth more. Thus, they may be willing to pay more for the items than others that do not receive premium bids. The implications are disturbing in that sellers may be more motivated to enter a shill bid in order to drive up the final price in an online auction. We also examine and report on alternative hypotheses involving winners curse and the possibility of reserve price shill bids. Our results are developed in the context of a weighted least squares regression model that predicts an item selling price-to-average selling price ratio.

Analyzing information intermediaries in electronic brokerage

In the past, full-service stock brokerage firms had a strategic advantage over discount brokers because of the control full-service brokers had over the information provided to the customer. Full-service stockbrokers acted as information intermediaries in that they were able to capture residual value from the transfer of information to make a profit. Strategic vulnerability occurs, in this case, when technology makes the information intermediaries market contestable, by allowing easy transfer of information, thus allowing competitors to establish themselves as alternatives to market leaders. This research explores how technological innovation sets the stage for strategic vulnerability for information intermediaries. We develop a model of the phases of strategic vulnerability and discuss three propositions that involve strategic vulnerability, stalling of technological adoption and value creation. We show how strategic vulnerability affects information intermediaries. We examine the electronic brokerage industry to illustrate how firms can retain competitive advantage by rebundling their product offerings to separate contestable from noncontestable products.

Research Frontiers in Object Technology

Object technology has been widely acclaimed as offering a revolution in computing that will resolve a myriad of problems inherent in developing and managing organizational information processing capabilities. Although its foundations arose in computer programming languages, object technology has implications for a wide range of business computing activities including: Programming, Analysis and Design, Information Management, and Information Sharing. We examine six fundamental research frontiers in each activity: Common Business Classes; Organizational Barriers; Applications and Tools; Reuse and Object Management; Standards, Testing, and Metrics; and Technology Investment. The cross product of the business computing activities with these fundamental research frontiers yields a taxonomy within which to position the research needed to realize the promises offered by object technology.