Kay-Yut Chen, Tad Hogg and Nathan Wozny
Abstract
We experimentally evaluate reputation mechanisms in an exchange
market in which participants have the option of not fulfilling
their contracts. These mechanisms vary in the information they
provide on past behavior. Participants can choose who they trade
with, allowing endogenous response to low reputation through
ostracizing or price discriminating behaviors. The participants
responded strategically to the provided information. In
particular, mechanisms revealing more information had a
statistically significant increase in fulfillment rates. Our
experimental design allowed identifying the effect of reputation
mechanism on endogenous market behavior. We found that decreasing
fulfillment led to lower efficiency and increased market volume
but did not affect the prices.
Full paper: reputationExpt.pdf
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