THE PROBLEM OF REPUTATION RELIABILITY IN ONLINE FREELANCE MARKETS

Elina Ishmukhametova and Marina Sandomirskaia
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Elina Ishmukhametova: National Research University Higher School of Economics

HSE Working papers from National Research University Higher School of Economics

Abstract: This paper explains how the problem of reputation credibility may arise in online freelance markets, as clients often complain about the quality of the completed work irrespective of the price and the rating of the worker. We develop a dynamic signaling model of falsified reputation purchase by low-skilled freelancers, focusing on a semi-separating equilibrium in every period. The main result states that when the costs of purchasing reputation are high, only the maximum rating is bought. This is due to low-skilled freelancers wanting to be chosen by clients in order to recoup their losses. When the costs are low, a variety of reputations are observed, but the reputation mechanism is not credible and adds little new information to prices

Keywords: reputation; freelance; marketplace. (search for similar items in EconPapers)
JEL-codes: C73 D82 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2023
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Published in WP BRP Series: Economics / EC, February 2023, pages 1-25

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