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The Evolution of Trust and Reputation: Results from Simulation Experiments

Andreas Diekmann () and Wojtek Przepiorka ()

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Abstract: In online interactions in general, but especially in interactions between buyers and sellers on internet-auction platforms, the interacting parties must deal with trust and cooperation problems. Whether a rating system is able to foster trust and cooperation through reputation and without an external enforcer is an open question. We therefore explore through ecological analysis different buyer and seller strategies in terms of their success and their contribution to supporting or impeding trust and cooperation. In our agent-based model, the interaction between a buyer and a seller is defined by a one-shot trust game with a reputation mechanism. In every interaction, a buyer has complete information about a seller's past behavior. We find that cooperation evolves under two conditions even in the absence of an external sanctioning authority. On the one hand, some minimal fraction of buyers must make use of the sellers’ reputation in their buying strategies and, on the other hand, trustworthy sellers must be given opportunities to gain a good reputation through their cooperative behavior. Despite the apparent usefulness of the reputation mechanism, a small number of deceitful sellers are able to hold their ground.

Keywords: trust game; reputation; agent-based simulation (search for similar items in EconPapers)
JEL-codes: C9 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cbe, nep-cmp, nep-evo, nep-exp, nep-mkt and nep-soc
Date: 2005-08-30
Note: Type of Document - pdf; pages: 7
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