Year of Publication

2010

Degree Name

Doctor of Philosophy (PhD)

Document Type

Dissertation

College

Business and Economics

Department

Business Administration

First Advisor

Dr. Robert Dahlstrom

Abstract

Signals convey information to marketplace participants regarding the unobservable quality of a product. Whenever product quality if unobservable prior to purchase, there is the risk of adverse selection. Problems of hidden information also occur in the consumer marketplace when the consumer is unable to verify the quality of a good prior to purchase. The sending, receiving, and interpretation or signals are potential ways to overcome the problem of adverse selection. In general, there is a lack of empirical evidence for signaling hypothesis, particularly that which links signaling to business performance outcomes. This research proposes that reputation serves as a marketplace signal to convey unobservable information about products offered for sale.

Signaling hypotheses are tested in a network context, examining the influence of signals throughout a network of buyers and sellers in a marketplace. There are many situations where a signal does not affect just one sender and one receiver; multiple constituencies may be aware of and react to a given signal. This study incorporates the actions of seller side principals, seller side agents, and buyer side agents when examining marketplace signals and provides a new perspective and better vantage point from which to test signaling theory.

The research setting for this study is the world’s largest individual marketplace for Thoroughbred yearlings. Several sources of secondary data are employed. These openly available published sources of information were selected as representative of the information that would typically be available to marketplace principals and agents to use in planning interactions in this unique live auction marketplace. The findings from his study indicate that the reputation of seller side principals and agents affect the eventual business performance outcomes as measured by final price brought at auction for goods. Specifically, seller side principals and agents who have developed a reputation for producing or selling high-priced or high-performing goods will be rewarded in the marketplace with relatively higher prices for their goods. Buyer side agents who are more central in the marketplace will pay relatively higher prices for goods. Evidence suggests that more central seller side agents will receive relatively higher prices for their goods.

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