Reputation Inflation

Apostolos Filippas, John Horton and Joseph M. Golden

No 25857, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: A solution to marketplace information asymmetries is to have trading partners publicly rate each other post-transaction. Many have shown that these ratings are effective; we show that their effectiveness deteriorates over time. The problem is that ratings are prone to inflation, with raters feeling pressure to leave “above average” ratings, which in turn pushes the average higher. This pressure stems from raters’ desire to not harm the rated seller. As the potential to harm is what makes ratings effective, reputation systems, as currently designed, sow the seeds of their own irrelevance.

JEL-codes: D02 D47 (search for similar items in EconPapers)
Date: 2019-05
Note: LS PR
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

Published as Apostolos Filippas & John J. Horton & Joseph M. Golden, 2022. "Reputation Inflation," Marketing Science, vol 41(4), pages 305-317.

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