The Impact of the Rating System on Online Marketplaces

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

Abstract: The rapid development in mobile internet technology has dramatically increased the customers’ demand for products and services by making the searching and information gathering process almost effortless. It also makes individual service providers and small business owners get exposed to huge demand from customers much easier. This unlocks tremendous economic value. Some leading examples are that platforms like Uber and Airbnb which seamlessly connect the online customers to offline servers via simple applications on the smart phone. Although the physical obstacles between customers and service providers have been removed by the new technology, the psychological obstacle—trust is still there. Rating system that aggregates other customers (or servers) previous experience about the service (or customers) is useful in helping both parties make decisions, which is also the key factor of the success of the platform. This paper studies the impact of rating system (unilateral and bilateral) on the ecosystem of the online marketplaces.

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.