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Learning trust

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Author Info

  • Bohnet, I.
  • Harmgart, H.
  • Huck, S.
  • Tyran, J.-R.

Abstract

We examine the effects of different forms of feedback information on the performance of markets that suffer from moral hazard problems due to sequential exchange. As orthodox theory would predict, we find that providing buyers with information about sellers' trading history boosts market performance. More surprisingly, this beneficial effect of incentives for reputation building is considerably enhanced if sellers, too, can observe other sellers' trading history. This suggests that two-sided market transparency is an important ingredient for the design of well-functioning markets that are prone to moral hazard.

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File URL: http://discovery.ucl.ac.uk/16578/1/16578.pdf
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Bibliographic Info

Paper provided by University College London in its series Open Access publications from University College London with number http://discovery.ucl.ac.uk/16578/.

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Date of creation: Apr 2005
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Publication status: Published in Journal of the European Economic Association (2005-04) v.3, p.322-329
Handle: RePEc:ner:ucllon:http://discovery.ucl.ac.uk/16578/

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  1. repec:oxf:wpaper:076 is not listed on IDEAS
  2. Iris Bohnet & Steffen Huck, 2004. "Repetition and Reputation: Implications for Trust and Trustworthiness When Institutions Change," American Economic Review, American Economic Association, vol. 94(2), pages 362-366, May.
  3. Gary E. Bolton & Elena Katok & Axel Ockenfels, 2004. "How Effective Are Electronic Reputation Mechanisms? An Experimental Investigation," Management Science, INFORMS, vol. 50(11), pages 1587-1602, November.
  4. Huck, S & Bohnet, I & Frey, BS, 2001. "More order with less law: on contract enforcement, trust, and crowding," Open Access publications from University College London http://discovery.ucl.ac.u, University College London.
  5. Slembeck, Tilman & Tyran, Jean-Robert, 2004. "Do institutions promote rationality?: An experimental study of the three-door anomaly," Journal of Economic Behavior & Organization, Elsevier, vol. 54(3), pages 337-350, July.
  6. Bohnet, Iris & Croson, Rachel, 2004. "Trust and trustworthiness," Journal of Economic Behavior & Organization, Elsevier, vol. 55(4), pages 443-445, December.
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Cited by:
  1. repec:ese:iserwp:2006-34 is not listed on IDEAS
  2. Huck, Steffen & Ruchala, Gabriele K. & Tyran, Jean-Robert, 2006. "Competition Fosters Trust," CEPR Discussion Papers 6009, C.E.P.R. Discussion Papers.
  3. Olof Johansson Stenman & Minhaj Mahmud & Peter Martinsson, 2006. "Trust and Religion: Experimental Evidence from Bangladesh," Keele Economics Research Papers KERP 2006/10, Centre for Economic Research, Keele University.
  4. Ermisch, John & Gambetta, Diego, 2006. "People's Trust: The Design of a Survey-based Experiment," IZA Discussion Papers 2216, Institute for the Study of Labor (IZA).
  5. repec:ese:iserwp:2008-37 is not listed on IDEAS
  6. repec:ese:iserwp:2007-32 is not listed on IDEAS
  7. Johansson-Stenman, Olof & Mahmud, Minhaj & Martinsson, Peter, 2005. "Trust, Trust Games and Stated Trust: Evidence from Rural Bangladesh," Working Papers in Economics 166, University of Gothenburg, Department of Economics.
  8. Steffen Huck & Gabriele K. Lünser, 2007. "Group Reputations - An Experimental Foray," Ifo Working Paper Series Ifo Working Paper No. 51, Ifo Institute for Economic Research at the University of Munich.
  9. Robert S. Gazzale & Tapan Khopkar, 2008. "Remain Silent and Ye Shall Suffer: Seller Exploitation of Reticent Buyers in an Experimental Reputation System," Department of Economics Working Papers 2008-22, Department of Economics, Williams College.
  10. Steffen Huck & Gabriele K. Ruchala & Jean-Robert Tyran, 2007. "Pricing and Trust," Discussion Papers 07-04, University of Copenhagen. Department of Economics.
  11. Steffen Huck & Jidong Zhou, 2011. "Consumer Behavioural Biases in Competition: A Survey," Working Papers 11-16, New York University, Leonard N. Stern School of Business, Department of Economics.
  12. Huck, Steffen & Lünser, Gabriele & Tyran, Jean-Robert, 2008. "Consumer Networks and Firm Reputation: A First Experimental Investigation," CEPR Discussion Papers 6624, C.E.P.R. Discussion Papers.
  13. Dimitri Dubois & Marc Willinger, 2007. "The role of players’ identification in the population on the trusting and the trustworthy behavior an experimental investigation," Working Papers 07-06, LAMETA, Universtiy of Montpellier, revised Jun 2007.
  14. Ermisch, John & Gambetta, Diego, 2010. "Do strong family ties inhibit trust?," Journal of Economic Behavior & Organization, Elsevier, vol. 75(3), pages 365-376, September.
  15. John Ermisch & Diego Gambetta & Heather Laurie & Thomas Siedler & S. C. Noah Uhrig, 2009. "Measuring people's trust," Journal of the Royal Statistical Society Series A, Royal Statistical Society, vol. 172(4), pages 749-769.

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