The Impact of Fake Reviews on Reputation Systems and Efficiency

Jan Philipp Krügel and Fabian Paetzel

VfS Annual Conference 2021 (Virtual Conference): Climate Economics from Verein für Socialpolitik / German Economic Association

Abstract: Online interactions are frequently governed by reputation systems that allow users to evaluate each other after an interaction. Effective reputation systems can increase trust and may improve efficiency in market settings. In recent years, however, fake reviews have become increasingly prevalent. Since it is difficult to clearly identify fake reviews in field studies, we design a lab10 oratory experiment. Using a repeated public good game with a reputation system, we study (i) how feedback manipulation influences the reliability of average ratings and (ii) whether the existence of manipulated ratings reduces efficiency. We find that feedback manipulation generally decreases the reliability of average ratings in comparison to a control treatment where cheating is not possible. When manipulation is possible and free, average ratings become less 15 reliable, expectations are lower and both cooperation and efficiency are significantly reduced. When there are costs of manipulation, however, average ratings are more reliable and contributions and efficiency are not impaired. Interestingly, this is the case even when costs of manipulation are comparatively low.

Keywords: Reputation Systems; Fake Reviews; Reliability of Ratings; Efficiency (search for similar items in EconPapers)
JEL-codes: C72 C91 D83 L14 (search for similar items in EconPapers)
Date: 2021
New Economics Papers: this item is included in nep-eff, nep-ore and nep-pay
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:vfsc21:242415

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