Cooperation Without Enforcement? A comparative analysis of litigation and online reputation as quality assurance mechanisms
Online reputation mechanisms are emerging as a promising alternative to more established mechanisms for promoting trust and cooperative behavior, such as legally enforceable contracts. As information technology dramatically reduces the...
| Main Authors: | , |
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| Format: | Working Paper |
| Language: | en_US |
| Published: |
2003
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| Subjects: | |
| Online Access: | http://hdl.handle.net/1721.1/1850 |
| _version_ | 1826191175332134912 |
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| author | Bakos, Yannis Dellarocas, Chrysanthos |
| author_facet | Bakos, Yannis Dellarocas, Chrysanthos |
| author_sort | Bakos, Yannis |
| collection | MIT |
| description | Online reputation mechanisms are emerging as a promising alternative to more
established mechanisms for promoting trust and cooperative behavior, such as legally
enforceable contracts. As information technology dramatically reduces the cost of
accumulating, processing and disseminating consumer feedback, it is plausible to ask
whether such mechanisms can provide an economically more efficient solution to a
wide range of moral hazard settings where societies currently rely on the threat of
litigation in order to induce cooperation. In this paper we compare online reputation to
legal enforcement as institutional mechanisms in terms of their ability to induce
cooperative behavior. Furthermore, we explore the impact of information technology
on their relative economic efficiency. We find that although both mechanisms result in
losses relative to the maximum possible social surplus, under certain conditions online
reputation outperforms litigation in terms of maximizing the total surplus, and thus the
resulting social welfar |
| first_indexed | 2024-09-23T08:51:57Z |
| format | Working Paper |
| id | mit-1721.1/1850 |
| institution | Massachusetts Institute of Technology |
| language | en_US |
| last_indexed | 2024-09-23T08:51:57Z |
| publishDate | 2003 |
| record_format | dspace |
| spelling | mit-1721.1/18502019-04-10T19:28:01Z Cooperation Without Enforcement? A comparative analysis of litigation and online reputation as quality assurance mechanisms Bakos, Yannis Dellarocas, Chrysanthos Online Reputation Mechanisms Quality Assurance Litigation Internet Game Theory E-commerce Information Technology Online reputation mechanisms are emerging as a promising alternative to more established mechanisms for promoting trust and cooperative behavior, such as legally enforceable contracts. As information technology dramatically reduces the cost of accumulating, processing and disseminating consumer feedback, it is plausible to ask whether such mechanisms can provide an economically more efficient solution to a wide range of moral hazard settings where societies currently rely on the threat of litigation in order to induce cooperation. In this paper we compare online reputation to legal enforcement as institutional mechanisms in terms of their ability to induce cooperative behavior. Furthermore, we explore the impact of information technology on their relative economic efficiency. We find that although both mechanisms result in losses relative to the maximum possible social surplus, under certain conditions online reputation outperforms litigation in terms of maximizing the total surplus, and thus the resulting social welfar 2003-04-14T19:13:32Z 2003-04-14T19:13:32Z 2003-04-14T19:13:32Z Working Paper http://hdl.handle.net/1721.1/1850 en_US MIT Sloan School of Management Working Paper;4295-03 543397 bytes application/pdf application/pdf |
| spellingShingle | Online Reputation Mechanisms Quality Assurance Litigation Internet Game Theory E-commerce Information Technology Bakos, Yannis Dellarocas, Chrysanthos Cooperation Without Enforcement? A comparative analysis of litigation and online reputation as quality assurance mechanisms |
| title | Cooperation Without Enforcement? A comparative analysis of litigation and online reputation as quality assurance mechanisms |
| title_full | Cooperation Without Enforcement? A comparative analysis of litigation and online reputation as quality assurance mechanisms |
| title_fullStr | Cooperation Without Enforcement? A comparative analysis of litigation and online reputation as quality assurance mechanisms |
| title_full_unstemmed | Cooperation Without Enforcement? A comparative analysis of litigation and online reputation as quality assurance mechanisms |
| title_short | Cooperation Without Enforcement? A comparative analysis of litigation and online reputation as quality assurance mechanisms |
| title_sort | cooperation without enforcement a comparative analysis of litigation and online reputation as quality assurance mechanisms |
| topic | Online Reputation Mechanisms Quality Assurance Litigation Internet Game Theory E-commerce Information Technology |
| url | http://hdl.handle.net/1721.1/1850 |
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