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Eliciting Honest Feedback in Electronic Markets

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Author Info
Miller, Nolan (Harvard U)
Resnick, Paul (U of Michigan)
Zeckhauser, Richard (Harvard U)

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Abstract

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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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.:
  1. 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. [Downloadable!] (restricted)
  2. Christopher Avery & Paul Resnick & Richard Zeckhauser, 1999. "The Market for Evaluations," American Economic Review, American Economic Association, vol. 89(3), pages 564-584, June. [Downloadable!] (restricted)
  3. Kreps, David M. & Wilson, Robert, 1982. "Reputation and imperfect information," Journal of Economic Theory, Elsevier, vol. 27(2), pages 253-279, August. [Downloadable!] (restricted)
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  4. Banerjee, Abhijit V, 1993. "The Economics of Rumours," Review of Economic Studies, Blackwell Publishing, vol. 60(2), pages 309-27, April. [Downloadable!] (restricted)
  5. 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. [Downloadable!] (restricted)
  6. 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. [Downloadable!] (restricted)
  7. Kandori, Michihiro, 1992. "Social Norms and Community Enforcement," Review of Economic Studies, Blackwell Publishing, vol. 59(1), pages 63-80, January. [Downloadable!] (restricted)
  8. Marco Ottaviani & Peter Norman Sorensen, 2001. "The Strategy of Professional Forecasting," Discussion Papers 01-09, University of Copenhagen. Department of Economics. [Downloadable!]
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  9. Banerjee, Abhijit V, 1992. "A Simple Model of Herd Behavior," The Quarterly Journal of Economics, MIT Press, vol. 107(3), pages 797-817, August. [Downloadable!] (restricted)
  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. [Downloadable!] (restricted)
  11. Prendergast, Canice, 1993. "A Theory of "Yes Men."," American Economic Review, American Economic Association, vol. 83(4), pages 757-70, September. [Downloadable!] (restricted)
  12. Reinhard Selten, 1998. "Axiomatic Characterization of the Quadratic Scoring Rule," Experimental Economics, Springer, vol. 1(1), pages 43-61, June. [Downloadable!] (restricted)
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  13. Emir Shuford & Arthur Albert & H. Edward Massengill, 1966. "Admissible probability measurement procedures," Psychometrika, Springer, vol. 31(2), pages 125-145, June. [Downloadable!] (restricted)
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Cited by:
(explanations, 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.)

  1. Paul Resnick & Richard Zeckhauser & John Swanson & Kate Lockwood, 2006. "The value of reputation on eBay: A controlled experiment," Experimental Economics, Springer, vol. 9(2), pages 79-101, June. [Downloadable!] (restricted)
    Other versions:
  2. Gary Bolton, 2003. "How Effective are Electronic Reputation Mechanisms?," Working Papers gb1, The Pennsylvania State University, Laboratory for Economic Mangement and Auctions, revised 01 Aug 2003. [Downloadable!]
  3. Gary Bolton & Elena Katok & Axel Ockenfels, 2002. "Bridging the Trust Gap in Electronic Markets," Papers on Strategic Interaction 2002-26, Max Planck Institute of Economics, Strategic Interaction Group. [Downloadable!]
  4. 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. [Downloadable!]
  5. Dellarocas, Chrysanthos, 2003. "Efficiency and Robustness of Binary Feedback Mechanisms in Trading Environments with Moral Hazard," Working papers 4297-03, Massachusetts Institute of Technology (MIT), Sloan School of Management. [Downloadable!]
  6. Axel Ockenfels, 2002. "Reputationsmechanismen auf Internet-Marktplattformen - Theorie und Empirie -," Papers on Strategic Interaction 2002-46, Max Planck Institute of Economics, Strategic Interaction Group. [Downloadable!]
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