Reputation and Social (Dis)approval in Feedback Mechanisms: An Experimental study

Several studies have highlighted the role of feedback mechanisms in the success of electronic marketplaces. In this current experiment, we attempt to isolate experimentally the role of reputation and social (dis)approval associated to ratings using a trust game experiment with the opportunity to rate one’s partner (Keser, 2003; Masclet and Penard, 2012). For this purpose we compare two experimental feedback systems that differ in the information that is publically available to participants. In a first feedback system, individuals’ rating profiles are public whereas in the second feedback system this information is private. Our findings indicate that both private and public ratings improve cooperation. However, we observe that private feedbacks are less efficient in enhancing trust and trustworthiness than public systems. This is mainly due to fact that fewer ratings are assigned in the private feedback system than in the public system. Altogether these findings suggest that, even if social (dis)approval matters, publicly observed feedback remains crucial to induce honest behaviors and improve efficiency on markets characterized by imperfect information.