Hostname: page-component-7b9c58cd5d-9k27k Total loading time: 0 Render date: 2025-03-16T13:43:21.548Z Has data issue: false hasContentIssue false
  • English
  • Français

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

Published online by Cambridge University Press:  14 March 2025

Robert S. Gazzale  and
Tapan Khopkar
Robert S. Gazzale*
Affiliation:
Department of Economics, Williams College, 24 Hopkins Hall Dr., Williamstown, MA 01267, USA
Tapan Khopkar*
Affiliation:
Cartesian Consulting Pvt. Ltd., 83-C Hansraj Pragji Bldg, Worli, Mumbai 400018, India
*
e-mail: [email protected]
e-mail: [email protected]
Get access Rights & Permissions [Opens in a new window]

Abstract

By providing incentives for sellers to act in a trustworthy manner, reputation mechanisms can mitigate moral-hazard problems when particular buyers and sellers interact infrequently. However, these mechanisms rely on buyers sharing their private information about sellers, and thus may suffer from too little feedback when provision is costly. We experimentally compare a standard feedback mechanism to one in which sellers can inspect a buyer's feedback-provision history, thus providing incentives to share private information even when costly. We find fairly high trust and trustworthiness in all markets, with buyers providing costly feedback, especially negative, sufficient to induce trustworthiness. However, feedback-provision histories did not improve outcomes, and at least weakly decreased trustworthiness with experienced participants, as this information enabled sellers to discriminate and ship less frequently to buyers lacking a reputation for information sharing.

Keywords

Experimental economicsTrustReputationElectronic markets

JEL classification

C91: Laboratory, Individual Behavior L14: Transactional Relationships • Contracts and Reputation • Networks C72: Noncooperative Games
Type
Research Article
Information
Experimental Economics , Volume 14 , Issue 2 , May 2011 , pp. 273 - 285
Copyright
Copyright © Economic Science Association 2011

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Bohnet, I., & Huck, S. (2004). Repetition and reputation: Implications for trust and trustworthiness when institutions change. The American Economic Review, 94(2), 362–366.CrossRefGoogle Scholar
Bohnet, I., Huck, S., Harmgart, H., & Tyran, J. R. (2005). Learning trust. Journal of the European Economic Association, 3(2/3), 322–329.CrossRefGoogle Scholar
Bolton, G. E., Katok, E., & Ockenfels, A. (2004). How effective are electronic reputation mechanisms? An experimental investigation. Management Science, 50(11), 1587–1602.CrossRefGoogle Scholar
Bolton, G. E., Katok, E., & Ockenfels, A. (2005). Cooperation among strangers with limited information about reputation. Journal of Public Economics, 89(8), 1457–1468.CrossRefGoogle Scholar
Carpenter, J. P. (2007). The demand for punishment. Journal of Economic Behavior & Organization, 62(4), 522–542.CrossRefGoogle Scholar
Chen, K. Y., Hogg, T., & Wozny, N. (2004a). Experimental study of market reputation mechanisms. In EC’04: Proceedings of the 5th ACM conference on electronic commerce (pp. 234–235). New York: ACM. 10.1145/988772.988810.CrossRefGoogle Scholar
Chen, K.Y., Hogg, T., & Wozny, N. (2004b). Experimental study of reputation mechanisms in an exchange economy. Available at http://www.hpl.hp.com/personal/Kay-Yut_Chen/paper/reputationExptOnly.pdf.CrossRefGoogle Scholar
Dellarocas, C., & Wood, C. A. (2008). The sound of silence in online feedback: estimating trading risks in the presence of reporting bias. Management Science, 54(3), 460–476.CrossRefGoogle Scholar
Ely, J., & Välimäki, J. (2003). Bad reputation. The Quarterly Journal of Economics, 118(3), 785–814.CrossRefGoogle Scholar
Engelmann, D., & Fischbacher, U. (2009). Indirect reciprocity and strategic reputation building in an experimental helping game. Games and Economic Behavior, 67(2), 399–407.CrossRefGoogle Scholar
Fehr, E., & Gächter, S. (2000). Cooperation and punishment in public goods experiments. The American Economic Review, 90(4), 980–994.CrossRefGoogle Scholar
Fischbacher, U. (2007). z-Tree: Zurich toolbox for ready-made economic experiments. Experimental Economics, 10(2), 171–178.CrossRefGoogle Scholar
Gazzale, R. S. (2005). Giving gossips their due: information provision in games with private monitoring. Economics department working paper, Williams College, url: http://ideas.repec.org/p/wpa/wuwpga/0508002.html.Google Scholar
Gazzale, R. S., & Khopkar, T. (2009). Remain silent and ye shall suffer: seller exploitation of reticent buyers in an experimental reputation system. Department of Economics Working Papers 2008-22, Williams College.Google Scholar
Huck, S., Lünser, G. K., & Tyran, J. R. (2006). Competition fosters trust. Discussion PaperDP6009, Centre for Economic Policy Research.CrossRefGoogle Scholar
Johnson, E. J., Camerer, C. F., Sen, S., & Rymon, T. (2002). Detecting failures of backward induction: monitoring information search in sequential bargaining. Journal of Economic Theory, 104(1), 16–47.CrossRefGoogle Scholar
Kandori, M. (1992). Social norms and community enforcement. Review of Economic Studies, 59(1), 6380.CrossRefGoogle Scholar
Li, L. I., & Xiao, E. (2010). Money talks? An experimental study of rebate in reputation system design. SSRN eLibrary, url: http://ssrn.com/paper=1597764.Google Scholar
Nikiforakis, N. (2008). Punishment and counter-punishment in public good games: can we still govern ourselves? Journal of Public Economics, 92(1-2), 91–112.CrossRefGoogle Scholar
Nowak, M. A., & Sigmund, K. (1998). Evolution of indirect reciprocity by image scoring. Nature, 393, 573–577.CrossRefGoogle ScholarPubMed
Ostrom, E., Walker, J., & Gardner, R. (1992). Covenants with and without a sword: self-governance is possible. The American Political Science Review, 86(2), 404–417.CrossRefGoogle Scholar
Resnick, P., & Zeckhauser, R. (2002). Trust among strangers in Internet transactions: empirical analysis of ebay's reputation system. In Baye, M. R. (Ed.), Advances in applied microeconomics: Vol. 11. The economics of the Internet and E-commerce. Amsterdam: Elsevier.Google Scholar
Resnick, P., Zeckhauser, R., Swanson, J., & Lockwood, K. (2006). The value of reputation on ebay: a controlled experiment. Experimental Economics, 9(2), 79–101.CrossRefGoogle Scholar
Selten, R., & Stoecker, R. (1986). End behavior in sequences of finite prisoner's dilemma supergames: a learning theory approach. Journal of Economic Behavior & Organization, 7(1), 47–70.CrossRefGoogle Scholar
Siegel, S., & Castellan, N. J. Jr. (1988). Nonparametric statistics for the behavioral sciences (2nd edn.). New York: McGraw-Hill.Google Scholar