Conflict Resolution vs. Conflict Escalation in Online Markets

41 Pages Posted: 2 Sep 2015

See all articles by Gary Bolton

Gary Bolton

University of Texas at Dallas - Naveen Jindal School of Management

Ben Greiner

Vienna University of Economics and Business

Axel Ockenfels

Max Planck Institute for Research on Collective Goods; University of Cologne - Department of Economics

Date Written: July 15, 2015

Abstract

Many online markets encourage traders to make good after an unsatisfactory transaction by offering the opportunity of withdrawing negative reputational feedback in a conflict resolution phase. Motivated by field evidence and guided by theoretical considerations, we use laboratory markets with two-sided moral hazard to show that this option, contrary to the intended purpose, produces an escalation of conflict in the form of strategically distorted reputation information and less trust and trustworthiness in the trading phase. The detrimental impact is mitigated by buyers who refuse to give feedback strategically, even when it comes at a cost to themselves. It is also mitigated in markets with one-sided moral hazard.

Keywords: conflict resolution system, market design, reputation, trust, reciprocity

JEL Classification: C73, C9, D02, L14

Suggested Citation

Bolton, Gary and Greiner, Ben and Ockenfels, Axel, Conflict Resolution vs. Conflict Escalation in Online Markets (July 15, 2015). UNSW Business School Research Paper No. 2015-19, Available at SSRN: https://ssrn.com/abstract=2654053 or http://dx.doi.org/10.2139/ssrn.2654053

Gary Bolton

University of Texas at Dallas - Naveen Jindal School of Management ( email )

P.O. Box 830688
Richardson, TX 75083-0688
United States

Ben Greiner (Contact Author)

Vienna University of Economics and Business

Welthandelsplatz 1
Vienna, Wien 1020
Austria

Axel Ockenfels

Max Planck Institute for Research on Collective Goods ( email )

Kurt-Schumacher-Str. 10
D-53113 Bonn, 53113
Germany

University of Cologne - Department of Economics ( email )

Albertus Magnus Platz
Cologne 50923
Germany

HOME PAGE: http://ockenfels.uni-koeln.de/

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
74
Abstract Views
1,037
Rank
576,227
PlumX Metrics