1. Explore the factor which influence the
degree of Lemon effect in online
shopping market
Group 4 Hanxiang Xie
Shiqian Wang
2. Preface
With the developing of society and upgrading of
technology, the way we shop has changed. Online
shopping has now become a trendy way, compared with
the traditional method of shopping, shopping online has
many advantages, but there are a number of problems.
For instance, the Lemon effect. As we know, there are
several disadvantages of the Lemon effect, such as reduce
the trade efficiency, lower the social welfare and so on. In
this paper, we will use statistic method to measure the
degree of Lemon effect in online market, and figure out
the factor which influence the level. In the end, we will
provide several feasible suggestions which could
contribute to eliminate Lemon effect in the online
shopping market.
3. Premises and assumptions
asymmetric information
Lemon effect expectation
lower than
expectation
higher than
expectation
bad review
average
rating
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10. commodity cellphone
digital
camera
headset
CORR 0.08 0.02 0.41
We could make a hypothesis that there is a positive relationship
between the average rating and the quantity of review. Because the
more review we make, the more effective information we will get.
Plenty of effective information contribute to reducing the degree of
asymmetric information, thus increasing the average rating, in other
words, eliminating the Lemon effects in market.
Exploring the relationship between the
average rating and the quantity of review
11. Reason:
• search cost
• hardware and software
Suggestion:
• comparision
• more information about software
• classify the review
Exploring the relationship between the
average rating and the quantity of review
12. Exploring the relationship between the
average rating and the quantity of review
0
100000
200000
300000
400000
500000
600000
700000
800000
4.2
4.3
4.4
4.5
4.6
4.7
4.8
4.9
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
Men's ware
rating
selling
Linear (rating)
13. Exploring the relationship between the
average rating and the quantity of review
0
200000
400000
600000
800000
1000000
1200000
1400000
4.5
4.55
4.6
4.65
4.7
4.75
4.8
4.85
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
Women's ware
rating
selling
Linear (rating)
14. Exploring the relationship between the
average rating and the quantity of review
0
50000
100000
150000
200000
250000
4.35
4.4
4.45
4.5
4.55
4.6
4.65
4.7
4.75
4.8
4.85
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
Suitcase
rating
selling
Linear (rating)
15. • These three pictures above are about clothing market.
• The correlation coefficients of rating and selling are around 0.254,
0.249, and 0.02.
• It kind of surprising that suitcases’ rating is independent from it’s
selling. Maybe people just don’t care much about the quality.
Exploring the relationship between the
average rating and the quantity of review
16. • Reason of lemon effect : For the clothing market, consumers care
more about looking, which is hard to show, than qualities. Plus, the
search costs are even higher because there’re much more clothing
products than electronics.
• Suggestion: Not only provide picture of the models, but also give
some measurements of models, so that consumers are easier to
evaluate their appearance.
Exploring the relationship between the
average rating and the quantity of review
20. • These three pictures above are about personal care market.
• The correlation coefficients of rating and selling are around 0.36,
0.15, and 0.18.
• Since each of them matches our prediction, I won’t be chatty here.
Exploring the relationship between the
average rating and the quantity of review
21. • Reason of lemon effect: The specific effect of personal care is hard to
tell. But since the products do not change overtime, the lemon effect
is quite low and the overall rating is relatively higher.
• Suggestion: Build brand names with high quality goods even though it
takes time. Do not provide new products too often unless you got a
very valuable brand name.
Exploring the relationship between the
average rating and the quantity of review
22. Exploring the relationship between the average rating and HHI
1101.3
932.4
1361.3
780.7
1339.8
1004.8
893.1
973.76 950.67
0
200
400
600
800
1000
1200
1400
1600
4.6200
4.6400
4.6600
4.6800
4.7000
4.7200
4.7400
4.7600
4.7800
4.8000
4.8200
4.8400
cellphone digital camara headphones man's ware women's
ware
suitcase bodywash shampoo tooth paste
T-mall.com
weighted rating
HHI
Linear (weighted rating)
Linear (HHI)
500.00
600.00
700.00
800.00
900.00
1000.00
1100.00
1200.00
91.00%
92.00%
93.00%
94.00%
95.00%
96.00%
97.00%
Cell phones Digital
Camera
Headsets Shampoos Body washes Toothpastes
HHI
Averagerating
Kind
JD.com
Score
HHI
23. • The first graph is of correlations in T-mall.com, it’s easy to see that they are
negatively correlated. Actually, the CORR is -0.17. And the second one is of
JD.com’s, of which the CORR is as high as 0.92.
• Why the CORR of these 2 B2C platforms are so different?
• The answer is:
• T-mall.com is a decentralize online shopping platform with very low entry barrier
and low quality control.
• JD.com more trusted and it has higher quality control and entry barrier.
Exploring the relationship between the average rating and HHI
24. • More specifically, T-mall is more like a perfect competitive market, so
the higher HHI hurts consumers for the sake of monopoly power. And
JD.com is a centralize platform which monitoring the best-seller and
keep their quality in a relative high level. The more one kind is sold,
the more JD concern about.
Exploring the relationship between the average rating and HHI
25. Comparing JD.com and T-mall.com
• Suggestions:
• Decentralize platforms like T-mall should make the brands in it to
compete more severely.
• Centralize platforms like JD.com should focus more on their best-
sellers.
• These are ways to improve their own consumer satisfaction, and that
is to lessen the lemon effect in online shopping.
• And that’s all for our presentation, and there’re more details in our
paper. Thanks for your time!
