Consumer Networks and Firm Reputation: A First Experimental Investigation
Arguing that consumers are the carriers of firms’ reputations, we examine the role of consumer networks for trust in markets that suffer from moral hazard. When consumers are embedded in a network, they can exchange information with their neighbours about their private experiences with different sellers. We find that such information exchange fosters firms' incentives for reputation building and, thus, enhances trust and efficiency in markets. This efficiency-enhancing effect is already achieved with a rather low level of network density.
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- Gary E. Bolton & Elena Katok & Axel Ockenfels, 2003.
"How Effective are Electronic Reputation Mechanisms? An Experimental Investigation,"
Working Paper Series in Economics
3, University of Cologne, Department of Economics.
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"Competition Fosters Trust,"
CEPR Discussion Papers
6009, C.E.P.R. Discussion Papers.
- Falk, Armin & Kosfeld, Michael, 2003.
"It's all about Connections: Evidence on Network Formation,"
IZA Discussion Papers
777, Institute for the Study of Labor (IZA).
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- 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.
- Iris Bohnet & Steffen Huck, 2004. "Repetition and Reputation: Implications for Trust and Trustworthiness When Institutions Change," CREMA Working Paper Series 2004-09, Center for Research in Economics, Management and the Arts (CREMA).
- Kosfeld Michael, 2004. "Economic Networks in the Laboratory: A Survey," Review of Network Economics, De Gruyter, vol. 3(1), pages 1-23, March.
- Brit Grosskopf & Rajiv Sarin, 2010. "Is Reputation Good or Bad? An Experiment," American Economic Review, American Economic Association, vol. 100(5), pages 2187-2204, December.
- Iris Bohnet & Heike Harmgart & Steffen Huck & Jean-Robert Tyran, 2005. "Learning Trust," Journal of the European Economic Association, MIT Press, vol. 3(2-3), pages 322-329, 04/05.
- Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer, vol. 10(2), pages 171-178, June.
- 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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