Challenges of Online Feedback Systems

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The Internet has enabled online feedback mechanisms (reputation systems) to reach global audiences at relatively little or no costs for the website owner. These mechanisms have become more commonplace and important a variety of users and domains. It is important for managers and researchers to understand the impact and scope of these mechanisms.

This paper attempts to address how the mechanisms can be improved, specifically:

  • The impact of non-truthful or non-answers on the entire system
  • Vulnerability of the system to strategic manipulation or identity changes
  • How do online feedback mechanisms compare with established institutions (e.g., formal contracting or advertising)

Results/Summary

  • The ability of the Internet to expand current networks, efficiently increases the pressures on entities to be honest
  • Feedback is a public good and will be under provided and is more costly to the first raters
  • Online markets are highly vulnerable to collusion
  • With imperfect monitoring, reputations are not sustainable in the long run (firms will "rest on their laurels"). This can be addressed by designing mechanisms to continue to show the short-term actions of the seller to potential buyers.

[edit] Abstract

Online feedback mechanisms harness the bidirectional communication capabilities of the Internet to engineer large-scale, word-of-mouth networks. Best known so far as a technology for building trust and fostering cooperation in online marketplaces, such as eBay, these mechanisms are poised to have a much wider impact on organizations. Their growing popularity has potentially important implications for a wide range of management activities such as brand building, customer acquisition and retention, product development, and quality assurance. This paper surveys our progress in understanding the new possibilities and challenges that these mechanisms represent. It discusses some important dimensions in which Internet-based feedback mechanisms differ from traditional word-of-mouth networks and surveys the most important issues related to their design, evaluation, and use. It provides an overview of relevant work in game theory and economics on the topic of reputation. It discusses how this body of work is being extended and combined with insights from computer science, management science, sociology, and psychology to take into consideration the special properties of online environments. Finally, it identifies opportunities that this new area presents for operations research/management science (OR/MS) research.

[edit] Paper Information

Authors: Chris Dellarocas

To read more check out the paper at The Digitization of Word of Mouth: Promise and Challenges of Online Feedback Mechanisms

This article was originally published in Management Science, Vol 49, Num 10, 2003.

[edit] Keywords

Reputation Mechanisms, Online Feedback, Electronic Markets, Trust, Internet, Game Theory

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