Reputation in the Long-Run

42 Pages Posted: 18 Jan 2018

See all articles by Apostolos Filippas

Apostolos Filippas

Fordham University - Gabelli School of Business

John J. Horton

New York University (NYU) - Department of Information, Operations, and Management Sciences

Joseph Golden

Collage.com

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Date Written: November 28, 2017

Abstract

Feedback scores in an online marketplace have risen sharply over time, leading to substantial top-censoring. Some of the increase is explained by more satisfied raters, but at least 35-45% is attributable to raters applying lower standards. We show that this “reputation inflation” is the equilibrium outcome of a model in which (a) inferences made by future trading partners determine what constitutes “bad” feedback and (b) giving “bad” feedback is costly to raters. The introduction of a new feedback system confirms our model predictions: raters were candid when feedback was private, but when feedback suddenly became public, reputations began inflating.

Suggested Citation

Filippas, Apostolos and Horton, John J. and Golden, Joseph, Reputation in the Long-Run (November 28, 2017). CESifo Working Paper Series No. 6750, Available at SSRN: https://ssrn.com/abstract=3103688

Apostolos Filippas

Fordham University - Gabelli School of Business ( email )

113 West 60th Street
Bronx, NY 10458
United States

HOME PAGE: http://apostolos-filippas.com

John J. Horton (Contact Author)

New York University (NYU) - Department of Information, Operations, and Management Sciences ( email )

44 West Fourth Street
New York, NY 10012
United States
6175952437 (Phone)

HOME PAGE: http://john-joseph-horton.com

Joseph Golden

Collage.com ( email )

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