Should eBay sellers be trusted?

eBay, the online marketplace has grown considerably since its inception as an online auction service. Today, there are millions of vendors using the service to sell everything from gadgets and gardening tools to staple guns and computer chips. After each transaction buyer and seller alike have the opportunity to leave feedback about their interaction. If a transaction goes well and the buyer is happy with the item received, then they will usually leave positive feedback. The more positive feedback a vendor accrues the better their chances of getting the next sale if there is a competitor with poorer feedback.

eBay recently revised its feedback policy to avoid retaliatory feedback from both sides arising from minor complaints. It also endeavours to police the reputation system as a whole to prevent both buyers and sellers from garnering unwarranted positive feedback.

One loophole, known as "feedback purchase," however, still exists. In its crudest form this might amount to a seller offering ten low-value items with a very low "Buy It Now" and free shipping. They fulfil each purchase quickly and gain ten positive feedback points. Then, after accumulating this positive feedback, they immediately start selling their more expensive target good, such as plasma televisions. Given that they gained positive feedback for selling paperclips, for instance, it might be said that they have essentially bought their good reputation.

Some sellers are so unscrupulous as to simply sell dozens of virtual items to "associates" in order to increase their positive feedback. The cost to such vendors are the transaction fees taken by eBay for the "sale." One can imagine that a large degree of positive feedback could be purchased very quickly using hundreds of dummy buyer accounts in this way. Unfortunately, eBay has lowered listings costs so that this type of fraud is even more attractive.

Now, Federico Dini of Consip S.p.A., and Giancarlo Spagnolo of the Faculty of Economics, at the University of Rome Tor Vergata, Italy, have carried out various field experiments with the eBay system to demonstrate that feedback purchase is very much a reality.

"One potential long-term consequence of feedback purchase, and more generally of feedback manipulation, is to compromise the reliability of information produced by, and trust in, the feedback mechanisms," say the researchers. This could apply equally to other ecommerce sites involving feedback systems, such as Amazon Marketplace and others.

"Our policy suggestions for eBay are to increase the fixed fee component to make extremely low value exchanges more costly, possibly reducing the proportional fee component, and to display the transactions' value with no limits on time," the team adds. Moreover, as was ever the case in ancient Rome: "caveat emptor," let the buyer beware.