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Remain Silent and Ye Shall Suffer: Seller Exploitation of Reticent Buyers in an Experimental Reputation System

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Abstract

By providing incentives for sellers to act in a trustworthy manner, reputation mechanisms in many online environments can mitigate moral-hazard problems when particular buyers and sellers interact infrequently. However, these mechanisms rely on buyers sharing their private information about sellers with the community, and thus may suffer from too little feedback when its provision is costly. In this experimental study, we compare a standard feedback mechanism to one in which sellers can inspect a buyer's feedback-provision history, thus providing the buyer with incentives to share private information even when costly. We find fairly high trust and trustworthiness levels in all markets, with buyers showing a willingness to provide costly feedback, especially negative feedback, sufficient to induce seller trustworthiness. While we find, ceteris paribus, evidence that the availability of feedback-provision histories increases buyer trust by reducing missing feedback, it did not improve overall trustworthiness as this information enabled sellers to discriminate and act in a trustworthy manner less frequently with those who share information less frequently.

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Bibliographic Info

Paper provided by Department of Economics, Williams College in its series Department of Economics Working Papers with number 2008-22.

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Length: 38 pages
Date of creation: Dec 2008
Date of revision:
Publication status: forthcoming in Experimental Economics.
Handle: RePEc:wil:wileco:2008-22

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Keywords: experimental economics; trust; reputation; electronic markets;

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References

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Citations

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Cited by:
  1. David Masclet & Thierry Pénard, 2008. "Is the ebay feedback system really efficient ? an experimental study," Economics Working Paper Archive (University of Rennes 1 & University of Caen) 200803, Center for Research in Economics and Management (CREM), University of Rennes 1, University of Caen and CNRS.
  2. 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.
  3. 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.

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