Variable Temptations and Black Mark Reputations

36 Pages Posted: 14 Jun 2011

See all articles by Christina Aperjis

Christina Aperjis

Hewlett-Packard Enterprise - Social Computing Lab

Yali Miao

Jane Street Capital

Richard J. Zeckhauser

Harvard University - Harvard Kennedy School (HKS); National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: May 3, 2011

Abstract

In a world of imperfect information, reputations often guide the sequential decisions to trust and to reward trust. We consider two-player situations, where one player - the truster - decides whether to trust, and the other player - the temptee - has a temptation to betray when trusted. The strength of the temptation to betray varies from encounter to encounter. We refer to a recorded betrayal as a black mark and focus on mechanisms that only reveal the number of black marks of a temptee. We show that the greater the number of black marks, the less likely the temptee is to betray. We then study the different equilibria that emerge, depending on which side of the market has the ability to specify the equilibrium. In closing, we generalize to cases where the number of encounters is also recorded.

Keywords: Game Theory, Trust, Reputation

Suggested Citation

Aperjis, Christina and Miao, Yali and Zeckhauser, Richard J., Variable Temptations and Black Mark Reputations (May 3, 2011). HKS Working Paper No. RWP11-020. Available at SSRN: https://ssrn.com/abstract=1861366 or http://dx.doi.org/10.2139/ssrn.1861366

Christina Aperjis (Contact Author)

Hewlett-Packard Enterprise - Social Computing Lab ( email )

1501 Page Mill Road
Palo Alto, CA 9434
United States

Yali Miao

Jane Street Capital ( email )

Roppongi 6-12-4, Minato-ku
Tokyo, 106-0032
Japan

Richard J. Zeckhauser

Harvard University - Harvard Kennedy School (HKS) ( email )

79 John F. Kennedy Street
Cambridge, MA 02138
United States
617-495-1174 (Phone)
617-384-9340 (Fax)

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States
617-495-1174 (Phone)
617-496-3783 (Fax)

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