  We study the economic interactions among sellers and buyers in online
markets. In such markets, buyers have limited information about the product
quality, but can observe the sellers' reputations which depend on their past
transaction histories and ratings from past buyers. Sellers compete in the same
market through pricing, while considering the impact of their heterogeneous
reputations. We consider sellers with limited as well as unlimited capacities,
which correspond to different practical market scenarios. In the unlimited
seller capacity scenario, buyers prefer the seller with the highest
reputation-price ratio. If the gap between the highest and second highest
seller reputation levels is large enough, then the highest reputation seller
dominates the market as a monopoly. If sellers' reputation levels are
relatively close to each other, then those sellers with relatively high
reputations will survive at the equilibrium, while the remaining relatively low
reputation sellers will get zero market share. In the limited seller capacity
scenario, we further consider two different cases. If each seller can only
serve one buyer, then it is possible for sellers to set their monopoly prices
at the equilibrium while all sellers gain positive market shares; if each
seller can serve multiple buyers, then it is possible for sellers to set
maximum prices at the equilibrium. Simulation results show that the dynamics of
reputations and prices in the longer-term interactions will converge to stable
states, and the initial buyer ratings of the sellers play the critical role in
determining sellers' reputations and prices at the stable state.
