Private Ordering on the Internet: The eBay Community of Traders

Private Ordering on the Internet: The eBay Community of Traders

2001Working Paper No. 1709

eBay provides an online auction venue for remote and anonymous individuals to realize gains from trade. As a venue it never sees the items sold, verifies the item listings, handles settlements, or represents either the buyer or seller. Despite the associated incentive problems over five million auctions are active on an average day. Trading is based on trust among members of its community, and trust is supported by a multilateral reputation mechanism based on user feedback. eBay supplements the reputation mechanism with rules and policies that mitigate incentive problems and support trust among users and trust between users and the company. Reputations and the rules and policies provide a private ordering of eBays Internet community. This paper examines that private ordering in the context of market strategy and in the shadow of the public order.