28 Pages Posted: 12 Feb 2008
Date Written: February 2008
As the Internet economy has grown, so too has the need for trust. A degree of trust is a critical ingredient in virtually all economic relationships, Internet or otherwise. Every day we choose to trust plumbers, doctors, employers, employees, teachers, airlines, and others. The need for trust arises from the fact that we cannot contract on every move other's make. And what we can contract on is often prohibitively costly to enforce. The anonymity of geographically dispersed Internet traders increases contracting difficulties: You may not be able to identify your eBay seller or verify the quality of the object being sold, let alone get your money back.
Keywords: trust, reputation systems, eBay
JEL Classification: D01, L14
Suggested Citation: Suggested Citation
Bolton, Gary E. and Ockenfels, Axel, The Limits of Trust in Economic Transactions - Investigations of Perfect Reputation Systems (February 2008). CESifo Working Paper Series No. 2216. Available at SSRN: https://ssrn.com/abstract=1092394