Optimal Windows for Aggregating Ratings in Electronic Marketplaces

Aseller in an online marketplace with an effective reputation mechanism should expect that dishonest behavior results in higher payments now whereas honest behavior results in a better reputation-and thus higher payments-in the future. We study the Window Aggregation Mechanism, a widely used class o...

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Bibliographic Details
Published in:Management science 2010-05, Vol.56 (5), p.864-880
Main Authors: Aperjis, Christina, Johari, Ramesh
Format: Article
Language:English
Subjects:
Aggregate analysis
Aggregation
Applied sciences
Business management
Computer science
control theory
systems
Computer systems and distributed systems. User interface
Discounts
Electronic commerce
Exact sciences and technology
Logarithms
Management science
Market analysis
Market mechanisms
Mechanism design
Methods
Moral hazard
Moral hazard models
Observational studies
Observations
online markets
ratings
Ratings & rankings
reputation mechanisms
Reputations
Software
Studies
Sufficient conditions
Truth
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Summary:Aseller in an online marketplace with an effective reputation mechanism should expect that dishonest behavior results in higher payments now whereas honest behavior results in a better reputation-and thus higher payments-in the future. We study the Window Aggregation Mechanism, a widely used class of mechanisms that shows the average value of the seller's ratings within some fixed window of past transactions. We suggest approaches for choosing the window size that maximizes the range of parameters for which it is optimal for the seller to be truthful. We show that mechanisms that use information from a larger number of past transactions tend to provide incentives for patient sellers to be more truthful but for higher-quality sellers to be less truthful.
ISSN:0025-1909
1526-5501
DOI:10.1287/mnsc.1090.1145