The Condliffe Annual Memorial Lecture took place on 1 April 2019 hosted by the Department of Economics and Finance of the UC Business School. Professor of Economics, Business and Public Policy at University of California, Berkeley, Steve Tadelis, engaged the audience with his talk ‘Using Economics to Engineer Trust in Online Markets.’
With first-hand experience working at eBay and Amazon, Steve covered the fascinating topic of feedback systems that help create trust in online market places. He posed the question “How can markets flourish in the face of extreme asymmetric information…where buyers know almost nothing about the sellers?
He outlined recent research, which has exposed that the current buyer feedback systems used to create confidence in such markets are biased, suffer from “grade inflation”, and do not clearly differentiate between higher and lower quality sellers.
Professor Tadelis then presented ways to increase the effectiveness of online reputation systems and markets, such as making use of the proportion who choose not to leave reviews. However, since sellers will adapt their behaviour to whatever rating system market platforms devise, he suggested that such platforms use multiple measures of buyer satisfaction, combined in a ‘secret sauce.’
