Learning from other buyers: The effect of purchase history records in online marketplaces

In this study, we investigate how a new element of information - historical sales records - affects buyers' behavior in online marketplaces.' A historical sales record is the previous sales information of a seller for a certain product. It is provided on an online shop's item description page and managed by the online transaction platform. It is more pertinent to the item at hand than the seller's overall feedback score or reputation rating, as the latter can be accumulated by selling many other items. Online buyers can use the information in historical sales records to learn from other buyers' purchasing behaviors. We propose that a seller's historical sales records for a certain item will directly affect the potential buyer's perception of the item's quality, making a purchase more likely when an item has desirable historical sales records. We use two approaches to test our hypotheses. First, we analyze purchase data from global.eBay.com and Taobao.com and find that across a variety of products sampled, after controlling for price and a number of seller characteristics such as feedback scores/ratings, higher historical sales in a 30-day period are consistently associated with higher sales in the following seven days. This indicates that buyers are learning from other buyers. The second approach is a more direct examination of buyer behavior in which we run an experiment using an eye-tracking system to measure what information purchasers pay attention to on a website. We find that on the search result page, the area containing the historical sales record receives the longest fixation length from the participants, and the participants who look at the historical sales record longer tend to choose the seller with the highest historical sales. (C) 2012 Elsevier B.V. All rights reserved.