Money talks: : rebate mechanisms in reputation system design

• Autores: Lingfang (Ivy) Li, Erte Xiao
• Localización: Management science: journal of the Institute for operations research and the management sciences, ISSN 0025-1909, Vol. 60, Nº. 8, 2014, págs. 2054-2072
• Idioma: inglés
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• Resumen

  • Reputation systems that rely on voluntary feedback from traders are important in creating and sustaining trust in markets. Feedback nevertheless is a public good, and providing it is often costly. We combine theory with a laboratory experiment to study the effect of a seller precommitment mechanism: Sellers have an option to commit by providing a rebate to reduce the buyer's feedback reporting cost before making purchasing decisions. Our theory predicts that this mechanism induces noncooperative sellers to cooperate in the listed-price market. Using a buyer�seller trust game with a unilateral feedback scheme, we find that the seller's rebate decision has a significant impact on the buyer's purchasing decision via signaling the seller's cooperative type. More importantly, market efficiency under the precommitment mechanism increases with the probability that sellers will provide a rebate. Compared with the no rebate mechanism market, more efficient trades can be achieved when the sellers offer a rebate to the buyers in the market with the rebate mechanism, even when the rebate does not cover the full cost of feedback reporting.