Trust and Reputation in Internet Auctions

Exchange between anonymous actors in Internet auctions corresponds to a one-shot prisoner's dilemma-like situation. Therefore, in any given auction the risk is high that seller and buyer will cheat and, as a consequence, that the market will collapse. However, mutual cooperation can be attained by the simple and very efficient institution of a public rating system. By this system, sellers have incentives to invest in reputation in order to enhance future chances of business. Using data from about 200 auctions of mobile phones we empirically explore the effects of the reputation system. In general, the analysis of nonobtrusive data from auctions may help to gain a deeper understanding of basic social processes of exchange, reputation, trust, and cooperation, and of the impact of institutions on the efficiency of markets. In this study we report empirical estimates of effects of reputation on characteristics of transactions such as the probability of a successful deal, the mode of payment, and the selling price (highest bid). In particular, we try to answer the question whether sellers receive a "premium" for reputation. Our results show that buyers are willing to pay higher prices for reputation in order to diminish the risk of exploitation. On the other hand, sellers protect themselves from cheating buyers by the choice of an appropriate payment mode. Therefore, despite the risk of mutual opportunistic behavior, simple institutional settings lead to cooperation, relatively rare events of fraud, and efficient markets.

Microneurography in rats: a minimally invasive method to record single C-fiber action potentials from peripheral nerves in vivo

Microneurography is a method suitable for recording intraneural single or multiunit action potentials in conscious subjects. Microneurography has rarely been applied to animal experiments, where more invasive methods, like the teased fiber recording technique, are widely used. We have tested the feasibility of microneurographic recordings from the peripheral nerves of rats. Tungsten microelectrodes were inserted into the sciatic nerve at mid-thigh level. Single or multiunit action potentials evoked by regular electrical stimulation were recorded, digitized and displayed as a raster plot of latencies. The method allows unambiguous recording and recognition of single C-fiber action potentials from an in vivo preparation, with minimal disruption of the nerve being recorded. Multiple C-fibers can be recorded simultaneously for several hours, and if the animal is allowed to recover, repeated recording sessions can be obtained from the same nerve at the same level over a period of weeks or months. Also, single C units can be functionally identified by their changes in latency to natural stimuli, and insensitive units can be recognized as 'silent' nociceptors or sympathetic efferents by their distinctive profiles of activity-dependent slowing during repetitive electrical stimulation, or by the effect on spontaneous efferent activity of a proximal anesthetic block. Moreover, information about the biophysical properties of C axons can be obtained from their latency recovery cycles. Finally, we show that this preparation is potentially suitable for the study of C-fiber behavior in models of neuropathies and nerve lesions, both under resting conditions and in response to drug administration.

Reputation Formation and the Evolution of Cooperation in Anonymous Online Markets

Theoretical propositions stressing the importance of trust, reciprocity, and reputation for cooperation in social exchange relations are deeply rooted in classical sociological thought. Today’s online markets provide a unique opportunity to test these theories using unobtrusive data. Our study investigates the mechanisms promoting cooperation in an online-auction market where most transactions can be conceived as one-time-only exchanges. We first give a systematic account of the theoretical arguments explaining the process of cooperative transactions. Then, using a large dataset comprising 14,627 mobile phone auctions and 339,517 DVD auctions, we test key hypotheses about the effects of traders’ reputations on auction outcomes and traders’ motives for leaving feedback. Our statistical analyses show that sellers with better reputations have higher sales and obtain higher prices. Furthermore, we observe a high rate of participation in the feedback system, which is largely consistent with strong reciprocity—a predisposition to unconditionally reward (or punish) one’s interaction partner’s cooperation (or defection)—and altruism—a predisposition to increase one’s own utility by elevating an interaction partner’s utility. Our study demonstrates how strong reciprocity and altruism can mitigate the free-rider problem in the feedback system to create reputational incentives for mutually beneficial online trade.