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Remain silent and ye shall suffer: seller exploitation of reticent buyers in an experimental reputation system

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  • Robert Gazzale
  • Tapan Khopkar

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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  • Robert Gazzale & Tapan Khopkar, 2011. "Remain silent and ye shall suffer: seller exploitation of reticent buyers in an experimental reputation system," Experimental Economics, Springer;Economic Science Association, vol. 14(2), pages 273-285, May.
    • Handle: RePEc:kap:expeco:v:14:y:2011:i:2:p:273-285
    DOI: 10.1007/s10683-010-9267-z
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    Cited by:

    1. Matthias Wibral, 2015. "Identity changes and the efficiency of reputation systems," Experimental Economics, Springer;Economic Science Association, vol. 18(3), pages 408-431, September.
    2. Robert Gazzale & Tapan Khopkar, 2011. "Remain silent and ye shall suffer: seller exploitation of reticent buyers in an experimental reputation system," Experimental Economics, Springer;Economic Science Association, vol. 14(2), pages 273-285, May.
    3. Lumeau, Marianne & Masclet, David & Penard, Thierry, 2015. "Reputation and social (dis)approval in feedback mechanisms: An experimental study," Journal of Economic Behavior & Organization, Elsevier, vol. 112(C), pages 127-140.
    4. David Masclet & Thierry P鮡rd, 2012. "Do reputation feedback systems really improve trust among anonymous traders? An experimental study," Applied Economics, Taylor & Francis Journals, vol. 44(35), pages 4553-4573, December.
    5. Lingfang (Ivy) Li & Erte Xiao, 2014. "Money Talks: Rebate Mechanisms in Reputation System Design," Management Science, INFORMS, vol. 60(8), pages 2054-2072, August.
    6. David Masclet & Thierry Pénard, 2008. "Is the ebay feedback system really efficient ? an experimental study," Economics Working Paper Archive (University of Rennes & University of Caen) 200803, Center for Research in Economics and Management (CREM), University of Rennes, University of Caen and CNRS.

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    More about this item

    Keywords

    Experimental economics; Trust; Reputation; Electronic markets; C72; C91; L14;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

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