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Article

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Accepted version

Publication date

2023-11-01

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cc-by-nc-nd (c) Elsevier, 2023
Please use this identifier to cite or link to this item: https://hdl.handle.net/2445/201941

Bad reputation with simple rating systems

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https://doi.org/10.1016/j.geb.2023.07.019

Abstract

We consider information censoring through finite memory as a device against bad reputational concerns. Our class of constrained information policies resembles common practices in online reputation systems, on which customers increasingly rely whenever hiring experts. In a world of repeated interactions between a long-lived expert and short-lived customers, Ely and Välimäki (2003) show that unlimited record-keeping may induce the expert to overchoose a certain action, seeking reputational gains. Consequently, welfare may reduce and markets may break down. We show that simple rating systems in such world help overcome market failures and improve upon both the full-memory and the no-memory cases.

Subject

Competències professionals, Expectatives racionals (Teoria econòmica), Sistemes d'informació

Subject (English)

Vocational qualifications, Rational expectations (Economic theory), Information storage and retrieval systems

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Articles publicats en revistes (Economia)

Citation

LORECCHIO, Caio Paes Leme and MONTE, Daniel. Bad reputation with simple rating systems. Games and Economic Behavior. 2023. Vol. 142, num. 150-178. ISSN 0899-8256. [consulted: 16 of August of 2026]. Available at: https://hdl.handle.net/2445/201941

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