Reference Price Shifts and Customer Antagonism: Evidence from Reviews for Online Auctions

Based on data from a large-scale sales campaign on eBay, I show that successful auction customers punish the seller through unfavorable public feedback when they later learn about a cheaper fixed price offer. The probability of such feedback is four times as big for auction customers as for customers who bought the same item from the same seller for the fixed price. Remarkably, this probability is increasing in the auction price, even though auction customers actively shaped this price themselves. This price effect on unfavorable feedback is concentrated in a period immediately after the auction. In this period, customers could learn about the fixed price offer but could not gather any new information regarding the item they had just acquired because it had not yet been shipped. These findings are in line with a model of feedback-giving which combines reciprocal with reference-dependent preferences.