How Effective are Electronic Reputation Mechanisms? An Experimental Investigation
AbstractElectronic reputation or "feedback" mechanisms aim to mitigate the moral hazard problems associated with exchange among strangers by providing the type of information available in more traditional close-knit groups, where members are frequently involved in one another's dealings. In this paper, we compare trading in a market with online feedback (as implemented by many Internet markets) to a market without feedback, as well as to a market in which the same people interact with one another repeatedly (partners market). We find that, while the feedback mechanism induces quite a substantial improvement in transaction efficiency, it also exhibits a kind of public goods problem in that, unlike in the partners market, the benefits of trust and trustworthy behavior go to the whole community and are not completely internalized. We discuss the implications of this perspective for improving feedback systems.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by University of Cologne, Department of Economics in its series Working Paper Series in Economics with number 3.
Date of creation: 26 Nov 2003
Date of revision:
Publication status: Published in Management Science, Vol. 50, Number 11, Nov. 2004, 1587-1602
Other versions of this item:
- 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.
- NEP-ALL-2003-11-30 (All new papers)
- NEP-CBE-2003-11-30 (Cognitive & Behavioural Economics)
- NEP-COM-2003-11-30 (Industrial Competition)
- NEP-EXP-2003-11-30 (Experimental Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Diamond, Douglas W, 1989.
"Reputation Acquisition in Debt Markets,"
Journal of Political Economy, University of Chicago Press,
University of Chicago Press, vol. 97(4), pages 828-62, August.
- Axel Ockenfels & Gary E. Bolton, 2000. "ERC: A Theory of Equity, Reciprocity, and Competition," American Economic Review, American Economic Association, vol. 90(1), pages 166-193, March.
- Eric J. Friedman* & Paul Resnick, 2001. "The Social Cost of Cheap Pseudonyms," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 10(2), pages 173-199, 06.
- David Kreps & Paul Milgrom & John Roberts & Bob Wilson, 2010.
"Rational Cooperation in the Finitely Repeated Prisoners' Dilemma,"
Levine's Working Paper Archive
239, David K. Levine.
- Kreps, David M. & Milgrom, Paul & Roberts, John & Wilson, Robert, 1982. "Rational cooperation in the finitely repeated prisoners' dilemma," Journal of Economic Theory, Elsevier, vol. 27(2), pages 245-252, August.
- Bengt Holmstrom, 1999.
"Managerial Incentive Problems: A Dynamic Perspective,"
NBER Working Papers
6875, National Bureau of Economic Research, Inc.
- Holmstrom, Bengt, 1999. "Managerial Incentive Problems: A Dynamic Perspective," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 66(1), pages 169-82, January.
- Ellison, Glenn, 1994.
"Cooperation in the Prisoner's Dilemma with Anonymous Random Matching,"
Review of Economic Studies, Wiley Blackwell,
Wiley Blackwell, vol. 61(3), pages 567-88, July.
- Glen Ellison, 2010. "Cooperation in the Prisoner's Dilemma with Anonymous Random Matching," Levine's Working Paper Archive 631, David K. Levine.
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page. reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Peter Werner).
If references are entirely missing, you can add them using this form.