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Inflated reputations: Uncertainty, leniency & moral wiggle room in trader feedback systems

Author

Listed:
  • Gary E. Bolton

    (UT Dallas)

  • David J. Kusterer

    (University of Cologne)

  • Johannes Mans

    (University of Cologne)

Abstract

Feedback systems associated with Internet markets are known to be subject to strategic manipulation that can create distortions in the reputation information provided to traders. The experiment we present suggests that distortions can emerge from sources that have heretofore been overlooked: the leniency and moral wiggle room that arise when there is uncertainty about the source of transaction problems. The control the laboratory affords permits us to separate the influence exerted by uncertainty per se from that implied by behavioral leniency. We observe that uncertainty about seller responsibility leads to leniency behaviors that reduce the informativeness of the feedback system, thereby diminishing the incentives for honest seller behavior. Under uncertainty, buyers pay about the same prices but get significantly less.

Suggested Citation

  • Gary E. Bolton & David J. Kusterer & Johannes Mans, 2015. "Inflated reputations: Uncertainty, leniency & moral wiggle room in trader feedback systems," Cologne Graduate School Working Paper Series 06-04, Cologne Graduate School in Management, Economics and Social Sciences, revised 29 Jul 2016.
  • Handle: RePEc:cgr:cgsser:06-04
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    reputation; trust; leniency bias; electronic markets; experimental economics;

    JEL classification:

    • C9 - Mathematical and Quantitative Methods - - Design of Experiments
    • D4 - Microeconomics - - Market Structure, Pricing, and Design

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