Sharing Economy, Platforms and Crowds

Paper Number

1121

Paper Type

Completed

Description

In this study, we examine the business impact of social media participation on individual seller’s sales activities, exploiting a natural experiment wherein a large social marketplace for second-hand goods (Xianyu) unexpectedly removed its social media features (Fishponds). We leverage a novel dataset capturing both social media participation and sales activities for individual sellers, comprising of more than 180,000 transactions during a multi-week period around the event. To estimate the causal effect of the event, we employ a difference-in-differences design. We also assess the robustness of our results to an alternative estimation approach, namely generalized synthetic control. Our results consistently demonstrate that sellers who initially participated in social media channel experienced a significant decline in their sales after the channel shutdown. Exploring heterogeneity in the effects around a variety of seller and product listing features, we find evidence consistent with the notion that the sellers who benefit most from social media participation are those who face the greatest difficulty establishing trust with buyers. Our results provide robust evidence that social media participation thus serves a crucial role in fostering trust in social marketplaces. Our work offers nontrivial managerial implications, both for marketplace operators and individual sellers.

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09-Crowds

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Dec 12th, 12:00 AM

Individual Sellers’ Social Media Participation and Sales Activities in Social Marketplaces: Evidence from a Natural Experiment

In this study, we examine the business impact of social media participation on individual seller’s sales activities, exploiting a natural experiment wherein a large social marketplace for second-hand goods (Xianyu) unexpectedly removed its social media features (Fishponds). We leverage a novel dataset capturing both social media participation and sales activities for individual sellers, comprising of more than 180,000 transactions during a multi-week period around the event. To estimate the causal effect of the event, we employ a difference-in-differences design. We also assess the robustness of our results to an alternative estimation approach, namely generalized synthetic control. Our results consistently demonstrate that sellers who initially participated in social media channel experienced a significant decline in their sales after the channel shutdown. Exploring heterogeneity in the effects around a variety of seller and product listing features, we find evidence consistent with the notion that the sellers who benefit most from social media participation are those who face the greatest difficulty establishing trust with buyers. Our results provide robust evidence that social media participation thus serves a crucial role in fostering trust in social marketplaces. Our work offers nontrivial managerial implications, both for marketplace operators and individual sellers.

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