Sustainable reputations with rating systems
In a product choice game played between a long lived seller and an infinite sequence of buyers, we assume that buyers cannot observe past signals. To facilitate the analysis of applications such as online auctions (e.g. eBay), online shopping search engines (e.g. BizRate.com) and consumer reports, we assume that a central mechanism observes all past signals, and makes public announcements every period. The set of announcements and the mapping from observed signals to the set of announcements is called a rating system. We show that, absent reputation effects, information censoring cannot improve attainable payoffs. However, if there is an initial probability that the seller is a commitment type that plays a particular strategy every period, then there exists a finite rating system and an equilibrium of the resulting game such that, the expected present discounted payoff of the seller is almost his Stackelberg payoff after every history. This is in contrast to Cripps, Mailath and Samuelson (2004) , where it is shown that reputation effects do not last forever in such games if buyers can observe all past signals. We also construct finite rating systems that increase payoffs of almost all buyers, while decreasing the seller[modifier letter apostrophe]s payoff.
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- Martin Cripps & George J Mailath & Larry Samuelson, 2010.
"Imperfect Monitoring and Impermanent Reputations,"
Levine's Working Paper Archive
618897000000000060, David K. Levine.
- Cripps,M.W. & Mailath,G.J. & Samuelson,L., 2002. "Imperfect monitoring and impermanent reputations," Working papers 17, Wisconsin Madison - Social Systems.
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- Thomas Wiseman, 2006.
"Reputation and Impermanent Types,"
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650, Society for Economic Dynamics.
- Liu, Qingmin & Skrzypacz, Andrzej, 2009. "Limited Records and Reputation," Research Papers 2030, Stanford University, Graduate School of Business.
- Michihiro Kandori & Ichiro Obara, 2006.
"Less is more: an observability paradox in repeated games,"
International Journal of Game Theory,
Springer, vol. 34(4), pages 475-493, November.
- Michihiro Kandori & Ichiro Obara, 2003. "Less is More: An Observability Paradox in Repeated Gamess," CIRJE F-Series CIRJE-F-246, CIRJE, Faculty of Economics, University of Tokyo.
- Michihiro Kandori & Ichiro Obara, 2006. "Less is more: An Observability Paradox in Repeated Games," Levine's Bibliography 321307000000000342, UCLA Department of Economics.
- Heski Bar-Isaac, 2003. "Reputation and Survival: Learning in a Dynamic Signalling Model," Review of Economic Studies, Oxford University Press, vol. 70(2), pages 231-251.
- Christopher Phelan, 2001. "Public trust and government betrayal," Staff Report 283, Federal Reserve Bank of Minneapolis.
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