The eMarket for Lemons at The Wharton School

I had the opportunity to speak at The Wharton School, University of Pennsylvania last week about an article that Dr. Eric Clemons recently authored for the Journal of Management Information Systems, "An Empirical Investigation of Third-Party Seller Rating Systems in E-Commerce: The Case of buySAFE".  My presentation was focused on marketplace economics and specifically about information asymmetry, signaling, the "Market for Lemons" concept, and buySAFE.  In addition, I was able to share a few thoughts about my entrepreneurial experience with buySAFE.

As always, I had a great time as the guest of Dr. Eric Clemons, and I enjoyed hearing the passionate questions, insights and feedback from the students.  One of the students posted an article about my visit on his blog, The Un-Wharton

With all of the recent, big public announcements from eBay, the students were especially interested in hearing about eBay’s marketplace as well as my thoughts on how eBay should go about solving their biggest problem, information asymmetry.  To summarize, I believe eBay’s new CEO, John Donahoe, "gets it", and that the new actions he is taking are generally positive for the eBay marketplace. 

I played golf with John Donahoe a couple of months ago, and after spending four hours on the golf course with him, I came away confident that John intends to attack eBay’s information asymmetry problems very aggressively.  I believe you are seeing his early actions on this front now.

Of course, I still believe that bonding is the best way to solve eBay’s information asymmetry problems.  A neutral, credible, regulated, third party needs to take full responsibility for certifying the merchants, and then that third party institution needs to take full, financial responsibility for the actions of those merchants in the marketplace. eBay is simply a marketplace platform, and they cannot / should not take full responsibility for the merchants’ actions because that will open up all kinds of new legal liabilities and business risks for eBay’s shareholders. 

eBay should let a third party take on the responsibility and financial liability, and then it would be able to shield itself from the further legal problems, but also benefit from a sort of indirect regulatory oversight that is desperately needed in the core marketplace platform. My company, buySAFE, is willing to take responsibility for eBay’s counterfeit and fraud problems, merchant certification, etc…, and we would do it by bonding the merchants. 

As a fyi…  buySAFE has already bonded more than 100 million eBay listings and more than 15 million final transactions since 2004, so there is little doubt that Bonded Shopping has already proven to be a pretty attractive third-party solution to eBay’s ecommerce merchants.

6 thoughts on “The eMarket for Lemons at The Wharton School

  1. Steve,
    Interesting article. There is no doubt that consumer trust has been a major contributing factor to eBay’s lackluster numbers.
    I’ve seen eBay invest a lot of money in going after fraud, but the best solution of all is to prevent it before it happens.
    Making a merchant “transparent,” which is often not the case on auction sites goes a long way towards preventing fraud and customer abuse before it occurs.

  2. Steve- I appreciate the link to the Un-Wharton. The talk you gave was very interesting, and you don’t need me to tell you that buySAFE is a good idea – you already have 100 million listings to prove that. Thanks again! – Stu

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