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Eliciting Honest Feedback in Electronic Markets

  • Miller, Nolan

    (Harvard U)

  • Resnick, Paul

    (U of Michigan)

  • Zeckhauser, Richard

    (Harvard U)

Recommender and reputation systems seek to inform potential customers by securing current consumers' feedback about products and sellers. This paper proposes a payment-based system to induce honest reporting of feedback. The system applies proper scoring rules to each buyer's report, looking to how well it predicts the report of a later buyer. Honest reporting proves to be a Nash Equilibrium. To balance the budget, the incentive payment to each buyer is charged to someone other than the one whose report that buyer is asked to predict. In addition, payment schemes can be scaled to induce appropriate effort by raters.

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Paper provided by Harvard University, John F. Kennedy School of Government in its series Working Paper Series with number rwp02-039.

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Date of creation: Sep 2002
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Handle: RePEc:ecl:harjfk:rwp02-039
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  1. Banerjee, Abhijit V, 1993. "The Economics of Rumours," Review of Economic Studies, Wiley Blackwell, vol. 60(2), pages 309-27, April.
  2. Steven Tadelis, 2002. "The Market for Reputations as an Incentive Mechanism," Journal of Political Economy, University of Chicago Press, vol. 110(4), pages 854-882, August.
  3. Kreps, David M. & Wilson, Robert, 1982. "Reputation and imperfect information," Journal of Economic Theory, Elsevier, vol. 27(2), pages 253-279, August.
  4. Reinhard Selten, 1998. "Axiomatic Characterization of the Quadratic Scoring Rule," Experimental Economics, Springer, vol. 1(1), pages 43-61, June.
  5. Paul Resnick & Christopher Avery & Richard Zeckhauser, 1999. "The Market for Evaluations," American Economic Review, American Economic Association, vol. 89(3), pages 564-584, June.
  6. Banerjee, Abhijit V, 1992. "A Simple Model of Herd Behavior," The Quarterly Journal of Economics, MIT Press, vol. 107(3), pages 797-817, August.
  7. Adam Brandenburger & Ben Polak, 1996. "When Managers Cover Their Posteriors: Making the Decisions the Market Wants to See," RAND Journal of Economics, The RAND Corporation, vol. 27(3), pages 523-541, Autumn.
  8. Bikhchandani, Sushil & Hirshleifer, David & Welch, Ivo, 1992. "A Theory of Fads, Fashion, Custom, and Cultural Change in Informational Cascades," Journal of Political Economy, University of Chicago Press, vol. 100(5), pages 992-1026, October.
  9. Michi Kandori, 2010. "Social Norms and Community Enforcement," Levine's Working Paper Archive 630, David K. Levine.
  10. Carl Shapiro, 1982. "Consumer Information, Product Quality, and Seller Reputation," Bell Journal of Economics, The RAND Corporation, vol. 13(1), pages 20-35, Spring.
  11. Prendergast, Canice, 1993. "A Theory of "Yes Men."," American Economic Review, American Economic Association, vol. 83(4), pages 757-70, September.
  12. Emir Shuford & Arthur Albert & H. Edward Massengill, 1966. "Admissible probability measurement procedures," Psychometrika, Springer, vol. 31(2), pages 125-145, June.
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