Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/173026 
Year of Publication: 
2017
Series/Report no.: 
CESifo Working Paper No. 6750
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
Feedback scores in an online marketplace have risen sharply over time, leading to substantial top-censoring. Some of the increase is explained by more satisfied raters, but at least 35-45% is attributable to raters applying lower standards. We show that this “reputation inflation” is the equilibrium outcome of a model in which (a) inferences made by future trading partners determine what constitutes “bad” feedback and (b) giving “bad” feedback is costly to raters. The introduction of a new feedback system confirms our model predictions: raters were candid when feedback was private, but when feedback suddenly became public, reputations began inflating.
Document Type: 
Working Paper
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