Abstract. We run a series of controlled field experiments on eBay where buyers are rewarded for providing feedback. Our results suggest that the feedback rate increases when a rebate is given, though the effect is small. Moreover, the nature of buyer feedback is influenced by rewards: buyers are more likely to give positive feedback following a high-quality transaction (fast shipping) and less likely to give negative feedback following a lowquality transaction (slow shipping). In sum, you can buy feedback but you cannot buy unbiased feedback.
R eputation systems that rely on voluntary feedback from traders are important in creating and sustaining trust in markets. Feedback nevertheless is a public good, and providing it is often costly. We combine theory with a laboratory experiment to study the effect of a seller precommitment mechanism: Sellers have an option to commit by providing a rebate to reduce the buyer's feedback reporting cost before making purchasing decisions. Our theory predicts that this mechanism induces noncooperative sellers to cooperate in the listed-price market. Using a buyer-seller trust game with a unilateral feedback scheme, we find that the seller's rebate decision has a significant impact on the buyer's purchasing decision via signaling the seller's cooperative type. More importantly, market efficiency under the precommitment mechanism increases with the probability that sellers will provide a rebate. Compared with the no rebate mechanism market, more efficient trades can be achieved when the sellers offer a rebate to the buyers in the market with the rebate mechanism, even when the rebate does not cover the full cost of feedback reporting.
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