Our focus on eBay's reputation mechanism is justied for two reasons.First, electronic commerce in general and eBay in particular are a signicant economic phenomenon: in 2004, more than $34.1bn were transacted on eBay by more than one hundred million users.1 Second, with its well dened rules and available information, eBay presents the researcher with a fairly controlled environment for theory testing. Specically, a reasonable assumption on eBay is that the information one trader has about other traders is the same as the researcher's. Essentially, this information consists of a series of positive and negative feedback comments given by past trading partners. In this context, we can make sharper predictions about agent behavior than in other markets, in particular in markets where buyers and sellers share information that is not
observed by the researcher