IDEAS home Printed from https://ideas.repec.org/p/wiw/wus055/7387.html
   My bibliography  Save this paper

Fixing feedback revision rules in online markets

Author

Listed:
  • Bolton, Gary
  • Breuer, Kevin
  • Greiner, Ben
  • Ockenfels, Axel

Abstract

Feedback withdrawal mechanisms in online markets aim to facilitate the resolution of conflicts during transactions. Yet, frequently used online feedback withdrawal rules are flawed and may backfire by inviting strategic transaction and feedback behavior. Our laboratory experiment shows how a small change in the design of feedback withdrawal rules, allowing unilateral rather than mutual withdrawal, can both reduce incentives for strategic gaming and improve coordination of expectations. This leads to less trading risk, more cooperation, and higher market efficiency.

Suggested Citation

  • Bolton, Gary & Breuer, Kevin & Greiner, Ben & Ockenfels, Axel, 2020. "Fixing feedback revision rules in online markets," Department for Strategy and Innovation Working Paper Series 01/2020, WU Vienna University of Economics and Business.
    • Handle: RePEc:wiw:wus055:7387
    as

    Download full text from publisher

    File URL: https://epub.wu.ac.at/7387/
    File Function: original version
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Amy Farmer, 2007. "Bargaining over an Uncertain Value: Arbitration Mechanisms Compared," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 23(3), pages 547-579, October.
    2. Ben Greiner, 2015. "Subject pool recruitment procedures: organizing experiments with ORSEE," Journal of the Economic Science Association, Springer;Economic Science Association, vol. 1(1), pages 114-125, July.
    3. Martin Brown & Christian Zehnder, 2007. "Credit Reporting, Relationship Banking, and Loan Repayment," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 39(8), pages 1883-1918, December.
    4. Paul Belleflamme & Martin Peitz, 2018. "Inside the Engine Room of Digital Platforms: Reviews, Ratings, and Recommendations," Working Papers halshs-01714549, HAL.
    5. Ben Gillen & Erik Snowberg & Leeat Yariv, 2019. "Experimenting with Measurement Error: Techniques with Applications to the Caltech Cohort Study," Journal of Political Economy, University of Chicago Press, vol. 127(4), pages 1826-1863.
    6. Luís Cabral & Lingfang (Ivy) Li, 2015. "A Dollar for Your Thoughts: Feedback-Conditional Rebates on eBay," Management Science, INFORMS, vol. 61(9), pages 2052-2063, September.
    7. Ashenfelter, Orley, et al, 1992. "An Experimental Comparison of Dispute Rates in Alternative Arbitration Systems," Econometrica, Econometric Society, vol. 60(6), pages 1407-1433, November.
    8. Charness, Gary & Du, Ninghua & Yang, Chun-Lei, 2011. "Trust and trustworthiness reputations in an investment game," Games and Economic Behavior, Elsevier, vol. 72(2), pages 361-375, June.
    9. Huck, Steffen & Lünser, Gabriele K. & Tyran, Jean-Robert, 2012. "Competition fosters trust," Games and Economic Behavior, Elsevier, vol. 76(1), pages 195-209.
    10. Orley C. Ashenfelter & Radha K. Iyengar (ed.), 2009. "Economics of Commercial Arbitration and Dispute Resolution," Books, Edward Elgar Publishing, number 12750.
    11. Lafky, Jonathan, 2014. "Why do people rate? Theory and evidence on online ratings," Games and Economic Behavior, Elsevier, vol. 87(C), pages 554-570.
    12. Gary E. Bolton & Elena Katok & Axel Ockenfels, 2004. "How Effective Are Electronic Reputation Mechanisms? An Experimental Investigation," Management Science, INFORMS, vol. 50(11), pages 1587-1602, November.
    13. Bolton, Gary E. & Katok, Elena, 1998. "Reinterpreting Arbitration's Narcotic Effect: An Experimental Study of Learning in Repeated Bargaining," Games and Economic Behavior, Elsevier, vol. 25(1), pages 1-33, October.
    14. Keehyung Kim & Kevin Chung & Noah Lim, 2019. "Third-Party Reviews and Quality Provision," Management Science, INFORMS, vol. 67(6), pages 2695-2716, June.
    15. Iris Bohnet & Steffen Huck, 2004. "Repetition and Reputation: Implications for Trust and Trustworthiness When Institutions Change," American Economic Review, American Economic Association, vol. 94(2), pages 362-366, May.
    16. Huck, Steffen & Lünser, Gabriele K. & Tyran, Jean-Robert, 2010. "Consumer networks and firm reputation: A first experimental investigation," Economics Letters, Elsevier, vol. 108(2), pages 242-244, August.
    17. Paul Belleflamme & Martin Peitz, 2018. "Inside the Engine Room of Digital Platforms: Reviews, Ratings, and Recommendations," Working Papers halshs-01714549, HAL.
    18. Lingfang (Ivy) Li & Erte Xiao, 2014. "Money Talks: Rebate Mechanisms in Reputation System Design," Management Science, INFORMS, vol. 60(8), pages 2054-2072, August.
    19. Gary Bolton & Ben Greiner & Axel Ockenfels, 2018. "Dispute Resolution or Escalation? The Strategic Gaming of Feedback Withdrawal Options in Online Markets," Management Science, INFORMS, vol. 64(9), pages 4009-4031, September.
    20. John Duffy & Huan Xie & Yong-Ju Lee, 2013. "Social norms, information, and trust among strangers: theory and evidence," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 52(2), pages 669-708, March.
    21. John Duffy & Nick Feltovich, 2006. "Words, Deeds, and Lies: Strategic Behaviour in Games with Multiple Signals," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 73(3), pages 669-688.
    22. Bracht, Juergen & Feltovich, Nick, 2009. "Whatever you say, your reputation precedes you: Observation and cheap talk in the trust game," Journal of Public Economics, Elsevier, vol. 93(9-10), pages 1036-1044, October.
    23. Duffy, John & Feltovich, Nick, 2002. "Do Actions Speak Louder Than Words? An Experimental Comparison of Observation and Cheap Talk," Games and Economic Behavior, Elsevier, vol. 39(1), pages 1-27, April.
    24. Shavell, Steven, 1995. "Alternative Dispute Resolution: An Economic Analysis," The Journal of Legal Studies, University of Chicago Press, vol. 24(1), pages 1-28, January.
    25. Erik Snowberg & Leeat Yariv, 2021. "Testing the Waters: Behavior across Participant Pools," American Economic Review, American Economic Association, vol. 111(2), pages 687-719, February.
    26. Steven Tadelis, 2016. "Reputation and Feedback Systems in Online Platform Markets," Annual Review of Economics, Annual Reviews, vol. 8(1), pages 321-340, October.
    27. Michael Luca & Georgios Zervas, 2016. "Fake It Till You Make It: Reputation, Competition, and Yelp Review Fraud," Management Science, INFORMS, vol. 62(12), pages 3412-3427, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Rense Corten & Judith Kas & Timm Teubner & Martijn Arets, 2023. "The role of contextual and contentual signals for online trust: Evidence from a crowd work experiment," Electronic Markets, Springer;IIM University of St. Gallen, vol. 33(1), pages 1-17, December.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Fehr, Dietmar & Sutter, Matthias, 2019. "Gossip and the efficiency of interactions," Games and Economic Behavior, Elsevier, vol. 113(C), pages 448-460.
    2. Gary Bolton & Ben Greiner & Axel Ockenfels, 2018. "Dispute Resolution or Escalation? The Strategic Gaming of Feedback Withdrawal Options in Online Markets," Management Science, INFORMS, vol. 64(9), pages 4009-4031, September.
    3. Yan Chen & Peter Cramton & John A. List & Axel Ockenfels, 2021. "Market Design, Human Behavior, and Management," Management Science, INFORMS, vol. 67(9), pages 5317-5348, September.
    4. Lingfang (Ivy) Li & Steven Tadelis & Xiaolan Zhou, 2020. "Buying reputation as a signal of quality: Evidence from an online marketplace," RAND Journal of Economics, RAND Corporation, vol. 51(4), pages 965-988, December.
    5. Zou, Wenbo & Wang, Jinjie & Yan, Jubo, 2022. "Online markets and trust," Journal of Economic Behavior & Organization, Elsevier, vol. 201(C), pages 395-412.
    6. Zakaria Babutsidze & Nobuyuki Hanaki & Adam Zylbersztejn, 2021. "Nonverbal content and trust: An experiment on digital communication," Economic Inquiry, Western Economic Association International, vol. 59(4), pages 1517-1532, October.
    7. Zakaria Babutsidze & Nobuyuki Hanaki & Adam Zylbersztejn, 2020. "Nonverbal content and swift trust: An experiment on digital communication," Working Papers 2008, Groupe d'Analyse et de Théorie Economique Lyon St-Étienne (GATE Lyon St-Étienne), Université de Lyon.
    8. Grodeck, Ben & Tausch, Franziska & Wang, Chengsi & Xiao, Erte, 2023. "To insure or not to insure? Promoting trust and cooperation with insurance advice in markets," European Economic Review, Elsevier, vol. 160(C).
    9. Goeschl, Timo & Jarke, Johannes, 2017. "Trust, but verify? Monitoring, inspection costs, and opportunism under limited observability," Journal of Economic Behavior & Organization, Elsevier, vol. 142(C), pages 320-330.
    10. Roman Hoffmann & Bernhard Kittel & Mattias Larsen, 2021. "Information exchange in laboratory markets: competition, transfer costs, and the emergence of reputation," Experimental Economics, Springer;Economic Science Association, vol. 24(1), pages 118-142, March.
    11. Christiane Bozoyan & Sonja Vogt, 2016. "The Impact of Third-Party Information on Trust: Valence, Source, and Reliability," PLOS ONE, Public Library of Science, vol. 11(2), pages 1-18, February.
    12. Zakaria Babutsidze & Nobuyuki Hanaki & Adam Zylbersztejn, 2019. "Digital Communication and Swift Trust," SciencePo Working papers Main halshs-02050514, HAL.
    13. Jacquemet Nicolas & Zylbersztejn Adam, 2013. "Learning, Words and Actions: Experimental Evidence on Coordination-Improving Information," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 13(1), pages 215-247, July.
    14. Bracht, Juergen & Feltovich, Nick, 2009. "Whatever you say, your reputation precedes you: Observation and cheap talk in the trust game," Journal of Public Economics, Elsevier, vol. 93(9-10), pages 1036-1044, October.
    15. Gesche, Tobias, 2018. "Reference Price Shifts and Customer Antagonism: Evidence from Reviews for Online Auctions," VfS Annual Conference 2018 (Freiburg, Breisgau): Digital Economy 181650, Verein für Socialpolitik / German Economic Association.
    16. Eric Cardella, 2016. "Exploiting the guilt aversion of others: do agents do it and is it effective?," Theory and Decision, Springer, vol. 80(4), pages 523-560, April.
    17. Nikhil Garg & Ramesh Johari, 2021. "Designing Informative Rating Systems: Evidence from an Online Labor Market," Manufacturing & Service Operations Management, INFORMS, vol. 23(3), pages 589-605, May.
    18. Rense Corten & Judith Kas & Timm Teubner & Martijn Arets, 2023. "The role of contextual and contentual signals for online trust: Evidence from a crowd work experiment," Electronic Markets, Springer;IIM University of St. Gallen, vol. 33(1), pages 1-17, December.
    19. Dulleck, Uwe & Howell, Nicola J. & Koessler, Ann-Kathrin & Mason, Rosalind F., 2018. "Insights into the Impact of Bankruptcy's Public Record on Entrepreneurial Activity: Evidence from Economic Experiments," EconStor Preprints 180667, ZBW - Leibniz Information Centre for Economics.
    20. Kerschbamer, Rudolf & Neururer, Daniel & Sutter, Matthias, 2019. "Credence Goods Markets and the Informational Value of New Media: A Natural Field Experiment," IZA Discussion Papers 12184, Institute of Labor Economics (IZA).

    More about this item

    Keywords

    dispute resolution system; market design; reputation; trust;
    All these keywords.

    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • C9 - Mathematical and Quantitative Methods - - Design of Experiments
    • D02 - Microeconomics - - General - - - Institutions: Design, Formation, Operations, and Impact
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wiw:wus055:7387. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: WU Library (email available below). General contact details of provider: https://research.wu.ac.at/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.