How Effective are Electronic Reputation Mechanisms? An Experimental Investigation
Electronic reputation or "feedback" mechanisms aim to mitigate the moral hazard problems associated with exchange among strangers by providing the type of information available in more traditional close-knit groups, where members are frequently involved in one another's dealings. In this paper, we compare trading in a market with online feedback (as implemented by many Internet markets) to a market without feedback, as well as to a market in which the same people interact with one another repeatedly (partners market). We find that, while the feedback mechanism induces quite a substantial improvement in transaction efficiency, it also exhibits a kind of public goods problem in that, unlike in the partners market, the benefits of trust and trustworthy behavior go to the whole community and are not completely internalized. We discuss the implications of this perspective for improving feedback systems.
|Date of creation:||26 Nov 2003|
|Date of revision:|
|Publication status:||Published in Management Science, Vol. 50, Number 11, Nov. 2004, 1587-1602|
|Contact details of provider:|| Postal: Albertus Magnus Platz, 50923 Köln|
Phone: 0221 / 470 5607
Fax: 0221 / 470 5179
Web page: http://www.wiso.uni-koeln.de
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Diamond, Douglas W, 1989.
"Reputation Acquisition in Debt Markets,"
Journal of Political Economy,
University of Chicago Press, vol. 97(4), pages 828-62, August.
- Glenn Ellison, 1994. "Cooperation in the Prisoner's Dilemma with Anonymous Random Matching," Review of Economic Studies, Oxford University Press, vol. 61(3), pages 567-588.
- David Kreps & Paul Milgrom & John Roberts & Bob Wilson, 2010.
"Rational Cooperation in the Finitely Repeated Prisoners' Dilemma,"
Levine's Working Paper Archive
239, David K. Levine.
- Kreps, David M. & Milgrom, Paul & Roberts, John & Wilson, Robert, 1982. "Rational cooperation in the finitely repeated prisoners' dilemma," Journal of Economic Theory, Elsevier, vol. 27(2), pages 245-252, August.
- Bengt Holmstrom, 1999. "Managerial Incentive Problems: A Dynamic Perspective," NBER Working Papers 6875, National Bureau of Economic Research, Inc.
- Eric J. Friedman* & Paul Resnick, 2001. "The Social Cost of Cheap Pseudonyms," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 10(2), pages 173-199, 06.
- Axel Ockenfels & Gary E. Bolton, 2000. "ERC: A Theory of Equity, Reciprocity, and Competition," American Economic Review, American Economic Association, vol. 90(1), pages 166-193, March.
- Bengt Holmström, 1999. "Managerial Incentive Problems: A Dynamic Perspective," Review of Economic Studies, Oxford University Press, vol. 66(1), pages 169-182.
When requesting a correction, please mention this item's handle: RePEc:kls:series:0003. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Peter Werner)
If references are entirely missing, you can add them using this form.