I was a little surprised to see that eBay is changing its feedback system and sellers will no longer be able to give negative or neutral feedback about buyers. Sellers can still give positive feedback, and buyers can give any kind of feedback as before. The feedback system is what prevents eBay from being destroyed by a tsunami of adverse selection, so it’s a pretty big deal for them to change it in this way.

First of all I don’t really see the point of allowing sellers to place positive feedbacks about buyers if negative feedbacks are not allowed. A buyer’s feedback then doesn’t really give any more information than the number of trades that the buyer has completed.

More importantly, I can think of some circumstances where providing negative feedback about a buyer would be useful. For example, if buyers do not follow through and pay up on their winning bids, or do not pay attention to the auction description and subsequently make an unjustified complaint about the goods that they received. Also, this change means that sellers no longer have any power to retaliate against buyers who leave unjustified negative feedbacks. In the feedback game, it seems to give more power to buyers compared to before. eBay says this is exactly what it intends, and it is sellers who are abusing the system by leaving retaliatory negative feedback about buyers most frequently. In addition, the custom in online auctions is for the buyer to send payment first, and the seller to send goods later. This custom means that buyers are taking a greater risk than sellers, so perhaps biasing the feedback system in their favour is a sensible thing to do.

Overall it seems like there are a number of tradeoffs involved, and it’s not immediately clear whether this change will improve the feedback system’s ability to prevent fraud in auctions. I’d be very interested to know what kind of analysis eBay did to support changing the rules.