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Scamming and the Reputation of Drug Dealers on Darknet Markets

Abstract : In this paper I investigate the role of e-reputation mechanisms on illegal platforms that specialize in drug sales. I ask whether online reputation systems can limit the risk of scamming (i.e. fraud) by dishonest sellers, and thus prevent Akerlof-like market destruction. I do so by analyzing all published offers on the second-largest platform operating on March 18th 2017 (Hansa). Three types of drugs show relatively low scamming risks, with the average probability that a random seller effectively send the ordered good of over 83%. The recent shutdowns of the two leading platforms are likely to increase this probability by 2.7 to 9.7%. Endogeneity may either lead us to overestimate the effect of e-reputation mechanisms (e.g., unobserved heterogeneity in sellers) or underestimate it (e.g., better-functioning markets may attract more scammers).
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https://halshs.archives-ouvertes.fr/halshs-02180182
Contributor : Romain Espinosa <>
Submitted on : Friday, July 19, 2019 - 7:02:21 AM
Last modification on : Monday, February 22, 2021 - 1:56:28 PM

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Romain Espinosa. Scamming and the Reputation of Drug Dealers on Darknet Markets. International Journal of Industrial Organization, Elsevier, 2019, 67, ⟨10.1016/j.ijindorg.2019.102523⟩. ⟨halshs-02180182v2⟩

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