the game-theoretic psychology of reputation
21 october 2003

"To find out a girl's faults, praise her to her girlfriends." - Benjamin Franklin

Most online reputation systems, exemplified by ebay's seller and buyer feedback system, employ a signalling reputation paradigm. In these systems, the emphasis is on promoting trust, not on sanctioning bad behavior. Although users have the option of leaving negative feedback, empirical research (Resnick & Zeckhauser, 2002) suggests that negative feedback is often grossly underreported in these systems, which is the desired result for the ecommerce merchants hosting these reputation systems. It seems that the cause of this phenomenon is rooted in the publicity of the reputation feedback. Contrast signalling reputation systems with gossip-based reputation systems which lacks this publicity criteria. Because gossip about a person is decentralized over that person's social network, and the gossip data is often held in confidence and difficult to trace, negative reputation is allowed to flourish in the shadows. Machiavellianism would suggest that, given the opportunity to gossip without accountability, people would need very little incentive to spread negative gossip. Gossip-based reputation systems thus follow a sanctioning reputation paradigm, where negative feedback is sure to catch up with and can possibly be used to ostracize a person.

The publicity of reputation feedback in the ebay-style reputation system promotes positive feedback and resists negative feedback. 1) Users view giving positive feedback as social capital. Buyers giving positive feedback to sellers usually receive reciprocally positive feedback for themselves. Thus improving someone else's reputation will enhance one's own reputation. 2) Users also see positive feedback as a type of online social courtesy for a transaction, like saying, "Thank you" to the store clerk that bags your groceries. 3) Negative feedback is discouraged because the information is not anonymous and quite public. 4) Giving negative feedback could result in reciprocal negative feedback, a loss of opportunity to do future business with someone, and other forms of retribution. 5) Giving negative feedback is generally rude. 6) Sellers do not want to sell to buyers who are quick to give negative feedback.

Taking a game theoretic view, we can say that the ebay-style reputation system promotes cooperation. Even if a buyer or seller's experience is negative, it is to everyone's advantage to leave positive feedback and suppress negative feedback. Suppose a buyer purchases something and receives in late and damaged. The damage is done already. If he chooses to leave negative feedback, he risks receiving negative feedback at the most and will certainly lose the opportunity to gain positive feedback at the least. Thus, negative feedback leads to the same, or a lower reputation. There is no reward to the buyer for leaving negative feedback. If a buyer leaves positive feedback, she is likely assured of positive feedback. Thus, positive feedback leads to the same, but most likely, a greater reputation. There is no punishment for misrepresenting a negative experience with positive feedback. It is easy to see that the publicity of the ebay reputation system is the critical condition for making this system a signalling reputation system.

In contrast, gossip-based reputation systems are largely private, and thus, do not possess the accountability qualities of a system like ebay's. In a gossip-based reputation system, a person's reputation is not held publicly and centrally, but rather, is diffused throughout the person's social network. At every node in the diffusion of reputation information, the reputation information is likely to be corrupted or manipulated for competitive or political gain by the manipulator. "Gossip" is hard, but not impossible to trace. The psychology of gossip is also different from the psychology of leaving feedback in a central and public way. Saying something bad to someone's face is always harder than saying it behind their back because we do not feel as much accountability nor do we perceive any immediate threat of sanctions. In Information Warfare, Hess and Hagen suggest that gossip can be even more damaging when people mobilize into groups to collectively assault a person's reputation.

We can also take the game theoretic view of gossip-based reputation systems. Inherent in acommunity or social network are competitive pressures for resources or prestige. By gossiping positive reputation information about a person within the network, there is no expectation that if and when that positive reputation actually reaches that person, there will be any attribution to the originator of that feedback. Additionally, enhancing the reputation of another (unless both parties are within a coalition) will only cause one's own reputation to be relatively reduced. Thus, positive gossiping will not generate reciprocation because attribution is lost and will likely lower one's own reputation relatively speaking. By negative gossip, there is little risk that the originator or manipulator of the gossip will ever be known to the target of the attack. If the attack is successful, the originator or manipulator of the gossip can gain reputation relatively. Thus, negative gossip bears little risk to the gossiper and can lead to increased reputation for the gossiper (relatively speaking).

By comparing public reputation systems and gossip reputation systems used a game theoretic framework, we can see that the accountability of public reputation systems skews reputations to be more positive in general, whereas the lack of accountability and the competitive nature of social network gossip skews reputations to be more negative in general. Sanctioning in gossip reputation systems is somewhat explicit, whereas a "sanction" in a public reputation system is implicit and usually expressed as a user who is out-reputed by his competitors, failing to garner as much attention as them.