Remain Silent and Ye Shall Suffer: Seller Exploitation of Reticent Buyers in an Experimental Reputation System

Williams College Economics Department Working Papers

38 Pages Posted: 10 Dec 2008

See all articles by Robert S. Gazzale

Robert S. Gazzale

University of Toronto - Department of Economics; Williams College - Department of Economics

Tapan Khopkar

affiliation not provided to SSRN

Date Written: December 9, 2008

Abstract

By providing incentives for sellers to act in a trustworthy manner, reputation mechanisms in many online environments can mitigate moral-hazard problems when particular buyers and sellers interact infrequently. However, these mechanisms rely on buyers sharing their private information about sellers with the community, and thus may suffer from too little feedback when its provision is costly. In this experimental study, we compare a standard feedback mechanism to one in which sellers can inspect a buyer's feedback-provision history, thus providing the buyer with incentives to share private information even when costly. We find fairly high trust and trustworthiness levels in all markets, with buyers showing a willingness to provide costly feedback, especially negative feedback, sufficient to induce seller trustworthiness. While we find, ceteris paribus, evidence that the availability of feedback-provision histories increases buyer trust by reducing missing feedback, it did not improve overall trustworthiness as this information enabled sellers to discriminate and act in a trustworthy manner less frequently with those who share information less frequently.

Keywords: experimental economics, trust, reputation, electronic markets

JEL Classification: C72, C73, C91, C92, D82, L14

Suggested Citation

Gazzale, Robert S. and Khopkar, Tapan, Remain Silent and Ye Shall Suffer: Seller Exploitation of Reticent Buyers in an Experimental Reputation System (December 9, 2008). Williams College Economics Department Working Papers, Available at SSRN: https://ssrn.com/abstract=1313230 or http://dx.doi.org/10.2139/ssrn.1313230

Robert S. Gazzale (Contact Author)

University of Toronto - Department of Economics ( email )

150 St. George Street
Toronto, Ontario M5S 3G7
Canada
416.978.2123 (Phone)

HOME PAGE: http://www.economics.utoronto.ca/gazzale/

Williams College - Department of Economics ( email )

24 Hopkins Hall Drive
Williamstown, MA 01267
United States

Tapan Khopkar

affiliation not provided to SSRN ( email )

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