Reputation Management Systems Contribute To The Creation Of Trust
Reputation management systems resolve e-commerce problems
. Consumers will not trade on the internet unless they either trust the person they are dealing with and believe that the transaction will be executed in conformity with their expectations, or can rely on some sort of recompense if something goes wrong. How do reputation systems contribute to the creation of trust?Trust is at the very heart of an economic transaction. When an environment is filled with uncertainty that a transaction partner will not live up to his or her end of the deal in making a payment, delivering quality goods, or making timely payments, it is very unlikely that a deal will be struck.
In internet transactions people are not given the opportunity to inspect goods before a deal is made. These possibilities to touch, feel and see the product before purchasing, are limited in internet deals. Trust for the sellers must be fostered in other ways.
In the real world trust can be achieved through past personal transactions, person-to-person gossip that can build or destroy someone's reputation, or through borrowed contexts like someone's role in the community. On the internet the only piece of information that is automatically revealed is one's IP address. Identity in cyberspace cannot be automatically authenticated. This fosters lack of trust in electronic commerce. Online trust must be created in other ways like through third parties or through personal experience.
Some companies can profit from trusted reputations that have been earned in real life like Dell or Sony. Other companies earn their reliable reputations through word of mouth. However, transactions on the internet are conducted by organizations or people who are strangers to each other. Most trading relationships like on eBay or craigslist are one-time deals. It is a challenge for individuals to gain a global reputation, so they must earn it.
Online companies seek to give sellers and buyers a virtual identity that is authenticated through their member profile. eBay is a company that has experienced commercial success from establishing a reputation system that generates enough trust for strangers to trade. The fact that prior transactions conducted by a transaction partner have gone well establishes enough trust to trade. One of the indicators that eBay's reputation system fosters trust is the fact that sellers with a good reputation enjoy a premium on their services. Because of the trust fostered through feedback reputation forums, eBay today receives billion dollars in revenue.
by: Christian Heftel