Identity Management and Tradable Reputation

31 Pages Posted: 23 Jun 2009

See all articles by Hong Xu

Hong Xu

University of Texas at Austin - Department of Information, Risk, and Operations Management

Jianqing Chen

The University of Texas at Dallas, Jindal School of Management

Andrew B. Whinston

University of Texas at Austin - Department of Information, Risk and Operations Management

Date Written: June 19, 2009

Abstract

Online anonymity has posed a significant threat on online reputation mechanisms and online identity management. How to improve the reliability and effectiveness of online reputation has thus become an important question of theoretical and practical interest. We examine a reputation market in an infinite repeated game setting, where agents sell online services and trade their online reputations. Agents exert effort to provide services and high type agents have a lower cost of effort than low types. An auditor performs random checks on services and determines agents' reputations. Our analysis depicts a full equilibrium in the reputation system with audit, including separating, partial separating, and pooling equilibrium under different conditions. In particular, we show that full separation can arise as an equilibrium such that high-type agents can be sorted out from low-type agents by their reputations, which is in contrast to Tadelis (2002). In a separating equilibrium, reputations become a perfect indicator of agents' types, effort levels, and quality of the services. By proposing online reputations as an asset, our paper generates implications for establishing reliable online environments and promoting online interactions.

Keywords: reputation, online community, audit, identity management, electronic market

Suggested Citation

Xu, Hong and Chen, Jianqing and Whinston, Andrew B., Identity Management and Tradable Reputation (June 19, 2009). Available at SSRN: https://ssrn.com/abstract=1422723 or http://dx.doi.org/10.2139/ssrn.1422723

Hong Xu (Contact Author)

University of Texas at Austin - Department of Information, Risk, and Operations Management ( email )

2317 Speedway
Austin, TX 78712
United States

Jianqing Chen

The University of Texas at Dallas, Jindal School of Management ( email )

800 West Campbell Road
Richardson, TX 75080
United States

Andrew B. Whinston

University of Texas at Austin - Department of Information, Risk and Operations Management ( email )

CBA 5.202
Austin, TX 78712
United States
512-471-8879 (Phone)

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