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Uncertainty in online markets

Wahlberg, Jakob LU and Jakobsson, Viktor (2016) NEKH01 20152
Department of Economics
Abstract
This thesis examines how asymmetric information causes issues in online markets and how it leads to mispricing between buyers and sellers. Asymmetric information and its negative effect on traditional markets have been examined by earlier studies but we strive to test the the theory on an online market. This is tested by looking at how review systems affects the market and whether this information can mitigate the problem of asymmetric information. This is done by looking at data from Airbnb and from this data we build a multivariate regression to see how reviews affect prices. Our results show that a higher review score corresponds to a higher price and this indicates that buyers value the information provided by the review system. We can... (More)
This thesis examines how asymmetric information causes issues in online markets and how it leads to mispricing between buyers and sellers. Asymmetric information and its negative effect on traditional markets have been examined by earlier studies but we strive to test the the theory on an online market. This is tested by looking at how review systems affects the market and whether this information can mitigate the problem of asymmetric information. This is done by looking at data from Airbnb and from this data we build a multivariate regression to see how reviews affect prices. Our results show that a higher review score corresponds to a higher price and this indicates that buyers value the information provided by the review system. We can also see that an increase in the number of reviews has a significant impact on prices and this allows us to determine that asymmetric information is a problem in the market. By observing this we can conclude that online markets are affected by asymmetric information and that review systems is a method for mitigating the problem. The study does not include time series data or data from other online markets. (Less)
Please use this url to cite or link to this publication:
author
Wahlberg, Jakob LU and Jakobsson, Viktor
supervisor
organization
course
NEKH01 20152
year
type
M2 - Bachelor Degree
subject
keywords
asymmetric information, online markets, pricing behavior, uncertainty
language
English
id
8603655
date added to LUP
2016-02-11 14:59:47
date last changed
2016-02-11 14:59:47
@misc{8603655,
  abstract     = {This thesis examines how asymmetric information causes issues in online markets and how it leads to mispricing between buyers and sellers. Asymmetric information and its negative effect on traditional markets have been examined by earlier studies but we strive to test the the theory on an online market. This is tested by looking at how review systems affects the market and whether this information can mitigate the problem of asymmetric information. This is done by looking at data from Airbnb and from this data we build a multivariate regression to see how reviews affect prices. Our results show that a higher review score corresponds to a higher price and this indicates that buyers value the information provided by the review system. We can also see that an increase in the number of reviews has a significant impact on prices and this allows us to determine that asymmetric information is a problem in the market. By observing this we can conclude that online markets are affected by asymmetric information and that review systems is a method for mitigating the problem. The study does not include time series data or data from other online markets.},
  author       = {Wahlberg, Jakob and Jakobsson, Viktor},
  keyword      = {asymmetric information,online markets,pricing behavior,uncertainty},
  language     = {eng},
  note         = {Student Paper},
  title        = {Uncertainty in online markets},
  year         = {2016},
}