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Engineering Trust: Reciprocity in the Production of Reputation Information

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Author Info

  • Gary Bolton

    ()
    (Smeal College of Business, Pennsylvania State University, University Park, Pennsylvania 16802; and Jindal School of Management, University of Texas at Dallas, Richardson, Texas 75080)

  • Ben Greiner

    ()
    (School of Economics, University of New South Wales, Sydney NSW 2052, Australia)

  • Axel Ockenfels

    ()
    (Department of Economics, University of Cologne, D-50923 Köln, Germany)

Abstract

Reciprocity in feedback giving distorts the production and content of reputation information in a market, hampering trust and trade efficiency. Guided by feedback patterns observed on eBay and other platforms, we run laboratory experiments to investigate how reciprocity can be managed by changes in the way feedback information flows through the system, leading to more accurate reputation information, more trust, and more efficient trade. We discuss the implications for theory building and for managing the redesign of market trust systems. This paper was accepted by Teck Ho, decision analysis.

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File URL: http://dx.doi.org/10.1287/mnsc.1120.1609
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Bibliographic Info

Article provided by INFORMS in its journal Management Science.

Volume (Year): 59 (2013)
Issue (Month): 2 (January)
Pages: 265-285

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Handle: RePEc:inm:ormnsc:v:59:y:2013:i:2:p:265-285

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Keywords: market design; reputation; trust; reciprocity; eBay;

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References

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  1. Alvin E. Roth & Axel Ockenfels, 2002. "Last-Minute Bidding and the Rules for Ending Second-Price Auctions: Evidence from eBay and Amazon Auctions on the Internet," American Economic Review, American Economic Association, vol. 92(4), pages 1093-1103, September.
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  7. Brandts, J. & Figueras, N., 1997. "An Exploration of Reputation Formation in Experimental Games," UFAE and IAE Working Papers 404.97, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
  8. Canice Prendergast, 1999. "The Provision of Incentives in Firms," Journal of Economic Literature, American Economic Association, vol. 37(1), pages 7-63, March.
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  12. Werner Güth & Friederike Mengel & Axel Ockenfels, 2007. "An Evolutionary Analysis of Buyer Insurance and Seller Reputation in Online Markets," Theory and Decision, Springer, vol. 63(3), pages 265-282, November.
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  15. Resnick, Paul & Zeckhauser, Richard & Swanson, John & Lockwood, Kate, 2003. "The Value of Reputation on eBay: A Controlled Experiment," Working Paper Series rwp03-007, Harvard University, John F. Kennedy School of Government.
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Citations

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Cited by:
  1. Jonathan D. Levin, 2011. "The Economics of Internet Markets," NBER Working Papers 16852, National Bureau of Economic Research, Inc.
  2. Gary E. Bolton & Axel Ockenfels, 2009. "Testing and Modeling Fairness Motives," Rationality, Markets and Morals, Frankfurt School Verlag, Frankfurt School of Finance & Management, vol. 0(13), November.
  3. Axel Ockenfels, 2008. "Marktdesign und Experimentelle Wirtschaftsforschung," Working Paper Series in Economics 41, University of Cologne, Department of Economics.
  4. Aperjis, Christina & Miao, Yali & Zeckhauser, Richard Jay, 2011. "Variable Temptations and Black Mark Reputations," Scholarly Articles 5027138, Harvard Kennedy School of Government.
  5. Marianne Lumeau & David Masclet & Thierry Pénard, 2013. "Reputation and Social (Dis)approval in Feedback Mechanisms: An Experimental study," Economics Working Paper Archive (University of Rennes 1 & University of Caen) 201343, Center for Research in Economics and Management (CREM), University of Rennes 1, University of Caen and CNRS.
  6. Bolton, Gary E. & Ockenfels, Axel & Ebeling, Felix, 2011. "Information value and externalities in reputation building," International Journal of Industrial Organization, Elsevier, vol. 29(1), pages 23-33, January.
  7. Bolton, Gary E. & Ockenfels, Axel, 2014. "Does laboratory trading mirror behavior in real world markets? Fair bargaining and competitive bidding on eBay," Journal of Economic Behavior & Organization, Elsevier, vol. 97(C), pages 143-154.
  8. Itay P. Fainmesser & David A. Goldberg, 2011. "Bilateral and Community Enforcement in a Networked Market with Simple Strategies," Working Papers 2011-2, Brown University, Department of Economics.
  9. Bolton, Gary E. & Ockenfels, Axel, 2012. "Behavioral economic engineering," Journal of Economic Psychology, Elsevier, vol. 33(3), pages 665-676.
  10. Ockenfels, Axel & Sliwka, Dirk & Werner, Peter, 2010. "Bonus Payments and Reference Point Violations," IZA Discussion Papers 4795, Institute for the Study of Labor (IZA).
  11. Benjamin Edelman & Micahel Luca, 2014. "Digital Discrimination: The Case of Airbnb.com," Harvard Business School Working Papers 14-054, Harvard Business School.

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