Less Sensitive Reputation Spurs Cooperation: An Experiment on Noisy Reputation Systems

Abstract

Using a repeated public good game with stranger matching, we compare how two different reputation systems with endogenous evaluations affect rates of cooperation. Contributions are public information and each participant evaluates her partner’s contribution. At the beginning of each period, participants receive information about the partner’s evaluation in previous periods. There are two information treatments: Each participant receives information either about her own and her partner’s most recent evaluation, or about her own and her partner’s average evaluation. Results show that with average evaluations reputation is less sensitive, incentives for reputation building are stronger and contributions are higher.

Keywords: Conditional cooperation, Endogenous evaluations, Noisy reputation, Informativeness

JEL Classification: C72, C91, D03, D83