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eTrust

Forming Relationships in the Online World

Karen S. Cook, Chris Snijders, Vincent Buskens, Coye Cheshire

Publication Year: 2009

There is one thing that moves online consumers to click “add to cart,” that allows sellers to accept certain forms of online payment, and that makes online product reviews meaningful: trust. Without trust, online interactions can’t advance. But how is trust among strangers established on the Internet? What role does reputation play in the formation of online trust? In eTrust, editors Karen Cook, Chris Snijders, Vincent Buskens, and Coye Cheshire explore the unmapped territory where trust, reputation, and online relationships intersect, with major implications for online commerce and social networking. eTrust uses experimental studies and field research to examine how trust in anonymous online exchanges can create or diminish cooperation between people. The first part of the volume looks at how feedback affects online auctions using trust experiments. Gary Bolton and Axel Ockenfels find that the availability of feedback leads to more trust among one-time buyers, while Davide Barrera and Vincent Buskens demonstrate that, in investment transactions, the buyer’s own experience guides decision making about future transactions with sellers. The field studies in Part II of the book examine the degree to which reputation facilitates trust in online exchanges. Andreas Diekmann, Ben Jann, and David Wyder identify a “reputation premium” in mobile phone auctions, which not only drives future transactions between buyers and sellers but also payment modes and starting bids. Chris Snijders and Jeroen Weesie shift focus to the market for online programmers, where tough competition among programmers allows buyers to shop around. The book’s third section reveals how the quality and quantity of available information influences actual marketplace participants. Sonja Utz finds that even when unforeseen accidents hinder transactions—lost packages, computer crashes—the seller is still less likely to overcome repercussions from the negative feedback of dissatisfied buyers. So much of our lives are becoming enmeshed with the Internet, where ordinary social cues and reputational networks that support trust in the real world simply don’t apply. eTrust breaks new ground by articulating the conditions under which trust can evolve and grow online, providing both theoretical and practical insights for anyone interested in how online relationships influence our decisions.

Published by: Russell Sage Foundation

Title Page

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Copyright

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Contents

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pp. vii-viii

About the Authors

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pp. ix-x

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Introduction

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pp. 1-12

Trust facilitates social interaction. When it exists, it strengthens cooperation, provides the basis for risk-taking, and grants latitude to the parties involved. When it does not exist, various mechanisms are required to protect against exploitation. In its most basic form, trust can be reduced to a situation where A knows that if she hands over the control of the situation to B, B can choose between an action X or Y. ...

PART I: Effects of reputation systems on trust

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Chapter 1: The Limits of Trust in Economic Transactions: Investigations of Perfect Reputation Systems

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pp. 15-36

As the Internet economy has grown, so too has the need for trust. A degree of trust is critical in virtually all economic relationships, Internet or otherwise. Every day we choose to trust plumbers, doctors, employers, employees, teachers, airlines, and others. The need for trust arises from the fact that we cannot contract on every move others make. ...

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Chapter 2: Third-Party Effects

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pp. 37-72

Imagine that you have decided on a financial investment, for example, for a private pension, and you have to choose among several companies offering similar services. Imagine also that you do not have much experience with this type of investment. You could investigate the past performances of all companies and compare them, but this would take considerable time, especially if there are many of them. ...

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Chapter 3: Solving the Lemons Problem with Reputation

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pp. 73-108

In this chapter we ask whether reputation can be successfully used to provide a solution to the lemons problem. This is a potential threat to traders who conduct trades without institutional mechanisms for enforcing contracts. In a classic paper on the market for lemons, George Akerof argued that asymmetry of information, which existed ...

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Chapter 4: In the Eye of the Beholder: Culture, Trust, and Reputation Systems

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pp. 109-136

A reputation system collects, aggregates, and distributes information about people’s past behavior. Little is known about cross-cultural differences in how people interpret information from reputation systems and adjust their strategic behavior. This chapter presents the first experimental evidence about such cross-cultural differences. ...

PART II: Field studies on the reputation premium

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Chapter 5: Trust and Reputation in Internet Auctions

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pp. 139-165

Economic exchange between anonymous actors is risky for all interacting parties. Whether in barter or in sale against cash, in a bilateral exchange situation both actors have to choose between being more or less cooperative or acting fraudulently. A seller, for example, needs to decide whether to deliver at all, to deliver good quality, or to deliver bad quality, and a buyer may choose to evade, reduce, or delay the payment. ...

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Chapter 6: Online Programming Markets

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pp. 166-186

Many of the mechanisms that exist offline and ensure that an interaction between people runs smoothly are not available in online interactions. A large shadow of the future cannot easily be guaranteed, for example: who knows whether you are going to deal with the people in this online help forum again, whether you will be buying from the same online reseller again. ...

PART III: Assessing trust and reputation online

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Chapter 7: Assessing Trustworthiness in Providers

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pp. 189-214

In this chapter, we examine the factors that individuals use when determining the trustworthiness of exchange partners who provide either goods or services in online environments. We argue that the competence and motivations of the exchange partner are two key bases of individuals’ inferences about trustworthiness, ...

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Chapter 8: Rebuilding Trust after Negative Feedback: The Role of Communication

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pp. 215-237

Online reputation systems, also called feedback systems, are commonly regarded as the solution to the trust problem in online markets (see, for example, Ba and Pavlou 2002; Bolton, Katok, and Ockenfels 2004; chapter 1, this volume; Dellarocas 2003; Kollock 1999; Resnick et al. 2000; chapter 3, this volume). ...

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Chapter 9: The Acceptance and Effectiveness of Social Control on the Internet

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pp. 238-265

Social control is applied on the Internet in many forms. In leisure time communities, administrators may resort to drastic measures and banish misbehaving members (Suler and Phillips 1998), whereas scientific email list administrators influence member behavior successfully by simply appealing to norms (Matzat 2004). ...

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Chapter 10: Order, Coordination, and Uncertainty

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pp. 266-291

Online exchange systems that allow individuals to view, share, and edit text, images, audio, and video are now a key element of the Internet landscape. Millions of people who were once passive consumers of information provided by privileged gatekeepers can produce and share content at very low cost. ...

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Chapter 11: Cooperation with and without Trust Online

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pp. 292-318

The sweeping and extensive penetration of the Internet generates endless possibilities for emergent associations and exchange. Engendering trust may be critical to enabling agents to gain from such exchange; for example, trust can assist in overcoming dilemmas related to multinational organizations, global virtual teams, auction and barter sites, house exchange sites, ...

Index

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pp. 319-330


E-ISBN-13: 9781610446082
Print-ISBN-13: 9780871543110

Page Count: 272
Publication Year: 2009

Series Title: Russell Sage Foundation Series on Trust
Series Editor Byline: Karen S. Cook, Russell Hardin, Margaret Levi, series editors