Trust is an essential condition for exchange. Large societies must substitute the trust traditionally provided through kinship and sanctions in small groups to make exchange possible. The rise of internet-supported reputation systems has been celebrated for providing trust at a global scale, enabling the massive volumes of transactions between distant strangers that are characteristic of modern human societies. Here we problematize an overlooked side-effect of reputation systems: Equally trustworthy individuals may realize highly unequal exchange volumes. We report the results of a laboratory experiment that shows emergent differentiation between ex ante equivalent individuals when information on performance in past exchanges is shared. This arbitrary inequality results from cumulative advantage in the reputation-building process: Random initial distinctions grow as parties of good repute are chosen over those lacking a reputation. We conjecture that reputation systems produce artificial concentration in a wide range of markets and leave superior but untried exchange alternatives unexploited.

Teams, juries, electorates, and committees must often select from various alternative courses of action what they judge to be the best option. The phenomenon that the central tendency of many independent estimates is often quite accurate—“the wisdom of the crowd”—suggests that group decisions based on plurality voting can be surprisingly wise. Recent experimental studies demonstrate that the wisdom of the crowd is further enhanced if individuals have the opportunity to revise their votes in response to the independent votes of others. We argue that this positive effect of social information turns negative if group members do not first contribute an independent vote but instead cast their votes sequentially such that early mistakes can cascade across strings of decision makers. Results from a laboratory experiment confirm that when subjects sequentially state which of two answers they deem correct, majorities are more often wrong when subjects can see how often the two answers have been chosen by previous subjects than when they cannot. As predicted by our theoretical model, this happens even though subjects’ use of social information improves the accuracy of their individual votes. A second experiment conducted over the internet involving larger groups indicates that although early mistakes on easy tasks are eventually corrected in long enough choice sequences, for difficult tasks wrong majorities perpetuate themselves, showing no tendency to self-correct. This paper was accepted by Yuval Rottenstreich, decision analysis.

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Social relations through which information disseminates promote efficiency in social and economic interactions that are characterized by problems of trust. This provides incentives for rational actors to invest in their relations. In this article, we study a game-theoretic model in which two trustors interact repeatedly with the same trustee and decide, at the beginning of the game, whether to invest in establishing an information exchange relation between one another. We show that the costs the trustors are willing to bear for establishing the relation vary in a non-monotonic way with the severity of the trust problem. The willingness to invest in the information exchange relation is high particularly for trust problems that are neither too small nor too severe.

The outsourcing of domestic tasks is an important strategy for coping with the competing time claims of the family and the workplace. Previous research explained the use of domestic help mainly in terms of financial and time constraints. In this article, we conceptualize household work as producing not only goods but also direct utility, and we argue that the more pleasure household members take in doing domestic work, the less they outsource it. Using the Dutch Time Competition Survey (N = 736), we find that if partners enjoy maintenance, cleaning, cooking, or child care, they are less likely to outsource these tasks, controlling for time and monetary resources and gender-role expectations. A woman's preferences are more important for the outsourcing of cleaning and child care, whereas a man's preferences are more important for the outsourcing of home maintenance. Cooking is less likely to be outsourced when both men and women find it pleasurable to cook themselves.