What’s a good reputation worth? 7.6 per cent more, apparently

What’s your good reputation worth? For years, that’s been incredibly hard to quantify. If you’re successful in life or work, it’s often partly due to having developed a good reputation amongst your peers — such that people trust you to do excellent work. Clearly, reputation is worth something. But how do you study it? How do you separate reputation out from other things?

By looking at online systems, that’s how. At places like Ebay, rep-management systems take reputation and distil it into a quintessence — something eminently quantifiable. A few economists at Harvard recently studied people who successful sell a lot of stuff on Ebay — and who have developed high reputation rankings. The result?

Zeckhauser’s research has determined that a person’s good reputation is not only valuable, but it’s worth about 7.6 percent in a retail transaction.

Zeckhauser said eBay’s brand of arms-length transaction provide perhaps one of the best opportunities to examine the economic importance of reputation. Though Zeckhauser said he’s sure that other reputation studies have been conducted on brick-and-mortar sellers, it’s very difficult to isolate reputation from the many other factors that create business success for a retailer in a community. Things such as location, civic associations, store layout, atmosphere, and even the personality of the seller can all affect how a buyer perceives his or her experience in a traditional retail store.

In eBay’s electronic marketplace, Zeckhauser was able to strip out all those external variables and isolate reputation. He and his colleagues auctioned carefully matched items - five vintage Valentine postcards, for example - from the two sellers. One seller had a superb, long-established reputation, which on eBay means many buyers had posted positive feedback after their transactions. The second set was auctioned by the same seller, but under a newly established identity with little or no track record.

After selling 200 matched pairs of vintage postcards, the established identity had brought in 7.6 percent more, on average, from his transactions.

“It’s a pretty fair rate of return for having a good reputation,” Zeckhauser said.

blog comments powered by Disqus

Search This Site


I'm Clive Thompson, the author of Smarter Than You Think: How Technology is Changing Our Minds for the Better (Penguin Press). You can order the book now at Amazon, Barnes and Noble, Powells, Indiebound, or through your local bookstore! I'm also a contributing writer for the New York Times Magazine and a columnist for Wired magazine. Email is here or ping me via the antiquated form of AOL IM (pomeranian99).

More of Me


Recent Comments

Collision Detection: A Blog by Clive Thompson