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Learning trust

Bohnet, I.; Harmgart, H.; Huck, S.; Tyran, J.-R.; (2005) Learning trust. Journal of the European Economic Association , 3 (2-3) pp. 322-329. 10.1162/jeea.2005.3.2-3.322. Green open access

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We examine the effects of different forms of feedback information on the performance of markets that suffer from moral hazard problems due to sequential exchange. As orthodox theory would predict, we find that providing buyers with information about sellers' trading history boosts market performance. More surprisingly, this beneficial effect of incentives for reputation building is considerably enhanced if sellers, too, can observe other sellers' trading history. This suggests that two-sided market transparency is an important ingredient for the design of well-functioning markets that are prone to moral hazard.

Type: Article
Title: Learning trust
Open access status: An open access version is available from UCL Discovery
DOI: 10.1162/jeea.2005.3.2-3.322
Publisher version: http://dx.doi.org/10.1162/jeea.2005.3.2-3.322
Language: English
Additional information: Copyright Massachusetts Institute of Technology Press
UCL classification: UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS > Dept of Economics
URI: https://discovery.ucl.ac.uk/id/eprint/16578
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