Electronic reputation or "feedback" mechanisms aim to mitigate the moral hazard problems associated with exchange among strangers by providing the type of information available in more traditional close-knit groups, where members are frequently involved in one another's dealings. In this paper, we compare trading in a market with online feedback (as implemented by many Internet markets) to a market without feedback, as well as to a market in which the same people interact with one another repeatedly (partners market). We find that, while the feedback mechanism induces quite a substantial improvement in transaction efficiency, it also exhibits a kind of public goods problem in that, unlike in the partners market, the benefits of trust and trustworthy behavior go to the whole community and are not completely internalized. We discuss the implications of this perspective for improving feedback systems.

We investigate learning by doing in the newsvendor inventory problem. An earlier study observed that decision makers tend to anchor their orders around average demand and fail to adjust sufficiently toward the expected profit-maximizing order. Principles of behavioral theory suggest some relatively simple interventions into the decision maker's experience and feedback that might improve performance, and these guide our investigation. The results imply that the institutional organization of experience and feedback may have a significant influence on whether inventory is stocked optimally.newsvendor problem, feedback, behavioral operations management, supply chain management, experimental economics

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The coordination of supply chains by means of contracting mechanisms has been extensively explored theoretically but not tested empirically. We investigate the performance of three commonly studied supply chain contracting mechanisms: the wholesale price contract, the buyback contract, and the revenue-sharing contract. The simplified setting we consider utilizes a two-echelon supply chain in which the retailer faces the newsvendor problem, the supplier has no capacity constraints, and delivery occurs instantaneously. We compare the three mechanisms in a laboratory setting using a novel design that fully controls for strategic interactions between the retailer and the supplier. Results indicate that although the buyback and revenue-sharing contracts improve supply chain efficiency relative to the wholesale price contract, the improvement is smaller than the theory predicts. We also find that although the buyback and revenue-sharing contracts are mathematically equivalent, they do not generally result in equivalent supply chain performance.supply chain contracts, experimental economics

Various contracts can be designed to coordinate a simple supplier–retailer channel, yet the contracts proposed in prior research and tested in a laboratory setting do not perform as standard theory predicts. The supplier, endowed with all bargaining power, can neither fully coordinate the channel nor extract all of the channel profit. We report on a sequence of laboratory experiments designed to separate possible causes of channel inefficiency. The three causes we consider are inequality aversion, bounded rationality, and incomplete information. It turns out that all three affect human behavior. Inequality aversion has by far the most explanatory power regarding retailers’ behavior. Incomplete information about the retailer's degree of inequality aversion has the most explanatory power in regards to the suppliers’ behavior. Bounded rationality affects both players, but is of secondary importance.