ABSTRACT
Problem Definition: Buyers on secondhand platforms often face uncertainties related to product quality, which frequently leads to disputes with sellers. Therefore, online dispute resolution systems (ODR) play a critical role not only in facilitating transactions, but also in influencing how sellers manage product quality. This paper investigates how different ODR system designs affect the users and the overall platform performance. Methodology/Results: We utilize a game-theoretic model to analyze two prevalent ODR system designs: Swift ODR, which streamlines dispute resolution with minimal seller involvement, and Comprehensive ODR, which requires active participation from both the seller and the buyer in resolving dispute. Our results demonstrate that Swift ODR can incentivize sellers to maintain higher product quality, which improves consumer welfare, even when its accuracy in resolving disputes is lower than that of Comprehensive ODR. Moreover, we find that the platform benefits more from Swift ODR if there is a sufficiently high proportion of honest sellers. Interestingly, we also find that Swift ODR can be preferable in a platform with fewer honest sellers under certain combinations of commission rates and judging accuracy. Managerial Implications: Our findings suggest that a simpler and less accurate dispute system can have the potential to deliver higher product quality, greater platform profit, and improved consumer welfare. Platforms should strategically design their ODR systems by closely evaluating the market compositions, the accuracy of dispute resolutions, and commission structures.
Hu, Bingyue and Lee, Wee Kiat, Rushed Justice: The Value of Fast-Track Dispute Systems on Second-Hand Platforms (August 27, 2025).
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