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Inflated reputations: Uncertainty, leniency & moral wiggle room in trader feedback systems

Gary Bolton, David Kusterer and Johannes Mans
Additional contact information
Gary Bolton: UT Dallas
Johannes Mans: University of Cologne

No 06-04, Cologne Graduate School Working Paper Series from Cologne Graduate School in Management, Economics and Social Sciences

Abstract: Feedback systems associated with Internet markets are known to be subject to strategic manipulation that can create distortions in the reputation information provided to traders. The experiment we present suggests that distortions can emerge from sources that have heretofore been overlooked: the leniency and moral wiggle room that arise when there is uncertainty about the source of transaction problems. The control the laboratory affords permits us to separate the influence exerted by uncertainty per se from that implied by behavioral leniency. We observe that uncertainty about seller responsibility leads to leniency behaviors that reduce the informativeness of the feedback system, thereby diminishing the incentives for honest seller behavior. Under uncertainty, buyers pay about the same prices but get significantly less.

Keywords: reputation; trust; leniency bias; electronic markets; experimental economics (search for similar items in EconPapers)
JEL-codes: C9 D4 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-exp and nep-hrm
Date: 2015-05-20, Revised 2016-07-29
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http://www.cgs.uni-koeln.de/fileadmin/wiso_fak/cgs ... aper/cgswp_06-04.pdf Version 2015-05-20 (application/pdf)
http://www.cgs.uni-koeln.de/fileadmin/wiso_fak/cgs ... /cgswp_06-04-rev.pdf Version 2016-07-29 (application/pdf)

Related works:
Working Paper: Inflated Reputations Uncertainty, Leniency & Moral Wiggle Room in Trader Feedback Systems (2016) Downloads
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