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Identity changes and the efficiency of reputation systems

Published online by Cambridge University Press:  14 March 2025

Matthias Wibral
Matthias Wibral*
Affiliation:
Institute for Applied Microeconomics, University of Bonn, Adenauerallee 24–42, 53113 Bonn, Germany
*
wibral@uni-bonn.de
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Abstract

Reputation systems aim to induce honest behavior in online trade by providing information about past conduct of users. Online reputation, however, is not directly connected to a person, but only to the virtual identity of that person. Users can therefore shed a negative reputation by creating a new account. We study the effects of such identity changes on the efficiency of reputation systems. We compare two markets in which we exogenously vary whether sellers can erase their rating profile and start over as new sellers. Buyer trust and seller trustworthiness decrease significantly when sellers can erase their ratings. With identity changes, trust is particularly low towards new sellers since buyers cannot discriminate between truly new sellers and opportunistic sellers who changed their identity. Nevertheless, we observe positive returns on buyer investment under the reputation system with identity changes, and our evidence suggests that trustworthiness is higher than in the complete absence of a reputation system.

Keywords

TrustReputationIdentity change
Type
Original Paper
Information
Experimental Economics , Volume 18 , Issue 3 , September 2015 , pp. 408 - 431
Copyright
Copyright © 2014 Economic Science Association

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Footnotes

Electronic supplementary material The online version of this article (doi:https://doi.org/10.1007/s10683-014-9410-3) contains supplementary material, which is available to authorized users.

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