Online Reputation and the Regulation of Information Asymmetries in the Platform Economy
Critical Analysis of Law, 2018, Forthcoming
37 Pages Posted: 11 Dec 2017 Last revised: 18 Mar 2018
Date Written: December 4, 2017
In the last years, online rating and reputational mechanisms have become increasingly important in the regulation of behavior in the platform economy. Consumers tend to rely on online reviews to distinguish between service providers both in the business-to-consumer and peer-to-peer economy. The European Commission, the Federal Trade Commission as well as a strand of legal scholarship have praised these online mechanisms for generating valuable information, reducing market failures, and managing consumer risks. However, this position has overlooked evidence suggesting that the additional data provided by online reputation might not be able to address information asymmetries due to the multiple shortcomings of existing online reputational mechanisms. In this article, I discuss the regulatory potential of online reputational feedback and offer a nuanced reflection on the traditional assumption that the availability of more information on the market reduces the need for public regulation. I suggest a co-regulatory framework for the regulation of online reputation that could help promote the transparency and trustworthiness of these informal enforcement mechanisms.
Keywords: online reputation,reputational feedback, sharing economy, word-of-mouth, regulation, information asymmetries, co-regulation, automation
JEL Classification: K1, K19, K23
Suggested Citation: Suggested Citation