The Square Root Agreement Rule for Incentivizing Truthful Feedback on Online Platforms

Vijay Kamble (), Nihar Shah (), David Marn (), Abhay Parekh () and Kannan Ramchandran ()
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Vijay Kamble: Department of Information and Decision Sciences, The University of Illinois Chicago, Chicago, Illinois 60607
Nihar Shah: School of Computer Science, Carnegie Mellon University Pittsburgh, Pennsylvania 15213
David Marn: Department of Electrical Engineering and Computer Sciences, University of California, Berkeley, Berkeley, California 94720
Abhay Parekh: Department of Electrical Engineering and Computer Sciences, University of California, Berkeley, Berkeley, California 94720
Kannan Ramchandran: Department of Electrical Engineering and Computer Sciences, University of California, Berkeley, Berkeley, California 94720

Management Science, 2023, vol. 69, issue 1, 377-403

Abstract: A major challenge in obtaining evaluations of products or services on e-commerce platforms is eliciting informative responses in the absence of verifiability. This paper proposes the square root agreement rule (SRA): a simple reward mechanism that incentivizes truthful responses to objective evaluations on such platforms. In this mechanism, an agent gets a reward for an evaluation only if the answer matches that of a peer agent, where this reward is inversely proportional to a popularity index of the answer. This index is defined to be the square root of the empirical frequency at which any two agents performing the same evaluation agree on the particular answer across evaluations of similar entities operating on the platform. Rarely agreed-on answers thus earn a higher reward than answers for which agreements are relatively more common. We show that in the many tasks regime, the truthful equilibrium under SRA is strictly payoff-dominant across large classes of natural equilibria that could arise in these settings, thus increasing the likelihood of its adoption. Although there exist other mechanisms achieving such guarantees, they either impose additional assumptions on the response distribution that are not generally satisfied for objective evaluations or they incentivize truthful behavior only if each agent performs a prohibitively large number of evaluations and commits to using the same strategy for each evaluation. SRA is the first known incentive mechanism satisfying such guarantees without imposing any such requirements. Moreover, our empirical findings demonstrate the robustness of the incentive properties of SRA in the presence of mild subjectivity or observational biases in the responses. These properties make SRA uniquely attractive for administering reward-based incentive schemes (e.g., rebates, discounts, reputation scores, etc.) on online platforms.

Keywords: information systems: IT policy and management; electronic commerce; information systems: systems analysis and design; systems design and implementation; economics: game theory and bargaining theory (search for similar items in EconPapers)
Date: 2023
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