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Group Reputations - An Experimental Foray

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  • Steffen Huck
  • Gabriele K. Lünser

Abstract

Often information structures are such that while individual reputation building is impossible groups of agents would have the possibility of building up a reputation. We experimentally examine whether groups of sellers in markets that suffer from moral hazard are able to build up reputations and, thus, avoid market breakdown. We contrast our findings with situations where sellers alternatively can build up an individual reputation or where there are no possibilities for reputation building at all. Our results offer a rather optimistic outlook on group reputations. Even though each seller only receives some of the reputation benefits of withstanding short-run incentives, sellers are able to overcome the dilemma and successfully exploit the information structure.

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Bibliographic Info

Paper provided by Ifo Institute for Economic Research at the University of Munich in its series Ifo Working Paper Series with number Ifo Working Paper No. 51.

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Date of creation: 2007
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Handle: RePEc:ces:ifowps:_51

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Related research

Keywords: Trust; group reputations; moral hazard; information conditions;

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References

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  1. Tirole, J., 1993. "A Theory of Collective Reputations with Applications to the Persistence of Corruption and to Firm Quality," Working papers, Massachusetts Institute of Technology (MIT), Department of Economics 93-13, Massachusetts Institute of Technology (MIT), Department of Economics.
  2. Camerer, Colin & Weigelt, Keith, 1988. "Experimental Tests of a Sequential Equilibrium Reputation Model," Econometrica, Econometric Society, Econometric Society, vol. 56(1), pages 1-36, January.
  3. Iris Bohnet & Heike Harmgart & Steffen Huck & Jean-Robert Tyran, 2005. "Learning Trust," Journal of the European Economic Association, MIT Press, MIT Press, vol. 3(2-3), pages 322-329, 04/05.
  4. Gary E. Bolton & Elena Katok & Axel Ockenfels, 2004. "How Effective Are Electronic Reputation Mechanisms? An Experimental Investigation," Management Science, INFORMS, INFORMS, vol. 50(11), pages 1587-1602, November.
  5. Isaac, R Mark & Walker, James M, 1988. "Group Size Effects in Public Goods Provision: The Voluntary Contributions Mechanism," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 103(1), pages 179-99, February.
  6. Andreoni, J. & Miller, J.H., 1991. "Rational Cooperative in the Finitely Repeated Prisoner's Dilemma: Experimental Evidence," Working papers, Wisconsin Madison - Social Systems 9102, Wisconsin Madison - Social Systems.
  7. Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer, Springer, vol. 10(2), pages 171-178, June.
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Cited by:
  1. 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), Center for Research in Economics and Management (CREM), University of Rennes 1, University of Caen and CNRS 201343, Center for Research in Economics and Management (CREM), University of Rennes 1, University of Caen and CNRS.
  2. Alexander E. Saak, 2012. "Collective Reputation, Social Norms, and Participation," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, Agricultural and Applied Economics Association, vol. 94(3), pages 763-785.
  3. McIntosh, Craig & Sadoulet, Elisabeth & Buck, Steven & Rosada, Tomas, 2013. "Reputation in a public goods game: Taking the design of credit bureaus to the lab," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 95(C), pages 270-285.

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