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Arbitrary Inequality in Reputation Systems.

Vincenz Frey1, Arnout van de Rijt1,2,3

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This summary is machine-generated.

Reputation systems create unequal exchange volumes between equally trustworthy individuals. Initial random advantages in reputation lead to cumulative inequality, limiting market diversity.

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Area of Science:

  • Social Sciences
  • Economics
  • Information Systems

Background:

  • Trust is fundamental for exchange in large societies.
  • Internet-based reputation systems facilitate global transactions between strangers.
  • These systems are crucial for modern economic interactions.

Purpose of the Study:

  • To investigate the unintended consequences of reputation systems on exchange volumes.
  • To examine how reputation systems create inequality among equivalent participants.
  • To understand the impact of cumulative advantage in reputation building.

Main Methods:

  • A laboratory experiment was conducted to simulate exchange scenarios.
  • Information on past exchange performance was shared among participants.
  • The study analyzed emergent differentiation between initially equivalent individuals.

Main Results:

  • Reputation systems lead to significant differences in exchange volumes among equally trustworthy individuals.
  • Cumulative advantage in reputation building creates arbitrary inequalities.
  • Early, random distinctions in reputation are amplified over time.

Conclusions:

  • Reputation systems can cause artificial market concentration.
  • Potentially superior exchange alternatives may remain unexploited due to these systems.
  • The study highlights a critical drawback of widespread reputation mechanisms.