Bilateral Rating Systems in Online Marketplaces: Design and Impact

Kartik Hosanagar, Operations, Information and Decisions, The Wharton School; Senthil Veeraraghavan, Operations, Information and Decisions, The Wharton School; and Chen Jin, Postdoctoral Researcher, The Wharton School

Abstract: In recent years, digital innovations have fundamentally changed how many services and resources are put together and deployed. These include marketplaces like Uber and Airbnb that help match decentralized supply with demand. Rating systems are known to be important enablers of trust in such markets in which complete strangers transact with one another. However, these new business models also raise fundamentally new questions related to the role of rating systems in bridging information asymmetry and trust issues. For example, not only can customers rate service providers but the providers can also rate customers and use these ratings to select which customers to service (or not). This research proposal seeks to examine the role of ratings in reducing market friction and enabling of better match between supply and demand.

Michelle Eckert is Marketing and Communications Coordinator for the Mack Institute, where she works to engage students, researchers, and corporate partners in opportunities for collaboration. Michelle received her B.A. in Art from Valparaiso University in 2007. Her background includes two AmeriCorps terms of service working to teach mathematics, computer literacy, and job readiness skills to out-of-school youth in Philadelphia, focusing particularly on promoting access to post-secondary education.