Bad reputation with simple rating systems

• 成果类型: Article
• 署名作者: Lorecchio, Caio; Monte, Daniel
• 署名单位: University of Barcelona; University of Turin; Collegio Carlo Alberto; Getulio Vargas Foundation
• 刊物名称: GAMES AND ECONOMIC BEHAVIOR
• ISSN/ISSBN: 0899-8256
• DOI: 10.1016/j.geb.2023.07.019
• 发表日期: 2023
• 页码: 150-178
• 关键词: Bad reputation; Rating systems; bounded rationality

摘要

We consider information censoring through finite memory as a device against bad reputational concerns. Our class of constrained information policies resembles common practices in online reputation systems, on which customers increasingly rely whenever hiring experts. In a world of repeated interactions between a long-lived expert and short-lived customers, Ely and Valimaki (2003) show that unlimited record-keeping may induce the expert to overchoose a certain action, seeking reputational gains. Consequently, welfare may reduce and markets may break down. We show that simple rating systems in such world help overcome market failures and improve upon both the full-memory and the no-memory cases.& COPY; 2023 The Author(s). Published by Elsevier Inc. This is an open access article under the CC BY-NC-ND license (http://creativecommons .org /licenses /by-nc -nd /4 .0/).