Reputation Systems in Online Transactions: Building Trust among Strangers - Prof. Robert L, Study notes of Information Technology

Download Reputation Systems in Online Transactions: Building Trust among Strangers - Prof. Robert L and more Study notes Information Technology in PDF only on Docsity! Reputation Systems T he Internet offers vast new opportu- nities to interact with total strangers. These interactions can be fun, informative, even profitable. But they also involve risk. Is the advice of a self-proclaimed expert at expertcentral.com reliable? Will an unknown dot- com site or eBay seller ship items promptly with appropriate packaging? Will the product be the same one described online? Prior to the Internet, such questions were answered, in part, through personal and corporate reputations. Vendors provided references, Better Business Bureaus tallied complaints, and past personal experience and per- son-to-person gossip told you on whom you could rely and on whom you could not. Participants’ standing in their communities, including their roles in church and civic organizations, served as a valu- able hostage. Internet services operate on a vastly larger scale COMMUNICATIONS OF THE ACM December 2000/Vol. 43, No. 12 45 Paul Resnick, Richard Zeckhauser, Eric Friedman, and Ko Kuwabara M A R C M O N G EA U For buyers and sellers alike, there’s no better way to earn one another’s trust in online interactions. 46 December 2000/Vol. 43, No. 12 COMMUNICATIONS OF THE ACM than Main Street and permit virtually anonymous interactions. Nevertheless, reputations still play a major role. Systems are emerging that respect anonymity and operate on the Internet’s scale. A reputation system col- lects, distributes, and aggregates feedback about partic- ipants’ past behavior. Though few producers or consumers of the ratings know one another, these systems help people decide whom to trust, encourage trustworthy behavior, and deter participation by those who are unskilled or dishonest. For example, consider eBay, the largest person-to-person online auc- tion site, with more than four mil- lion auctions active at a time: it provides limited insurance, and buyers and sellers both accept significant risks. There are prob- lematic transactions to be sure. Nevertheless, the overall rate of successful transactions remains astonishingly high for a market as “ripe with the possibility of large- scale fraud and deceit” as eBay [5]. The high rate of successful trans- actions is attributerd by eBay to its reputation system, called the Feed- back Forum. After a transaction is complete, the buyer and seller have the opportunity to rate each other (1, 0, or 1) and leave com- ments (such as “good transac- tion,” “nice person to do business with,” “would highly recom- mend”). Participants have running totals of feedback points attached (visibly) to their screen names, which might be pseudonyms. Yahoo! Auc- tion, Amazon, and other auction sites feature reputation systems like eBay’s, with variations, including a rating scale of 15, several measures (such as friendliness, prompt response, quality product), and averaging instead of total feedback score. Reputation systems have also spread beyond auction sites. For example, Bizrate.com rates registered retailers by asking consumers to complete a survey form after each purchase. So-called “expert sites” (www.expertcen- tral.com and www.askme.com) provide Q&A forums in which self-proclaimed experts provide answers for questions posted by other users in exchange for reputa- tion points and comments. Product review sites (such as www.epinions.com) offer rating services for product reviewers (the better the review, the more points the reviewer receives). iExchange.com tallies and displays reputations for stock market analysts based on the per- formance of their picks. Why are these explicit reputation systems so important for fostering trust among strangers? To answer, it helps to first examine how trust builds nat- urally in long-term relationships. First, when people interact with one another over time, the history of past interactions informs them about their abilities and dispositions. Second, the expectation of reciprocity or retalia- tion in future interac- tions creates an incentive for good behavior. (Polit- ical scientist Robert Axelrod calls this the “shadow of the future” [2].) An expectation that people will consider one another’s pasts in future interactions constrains behavior in the present. Among strangers, trust is understandably much more diffi- cult to build. Strangers lack known past histories or the prospect of future interaction, and they are not subject to a net- work of informed individuals who would punish bad and reward good behavior. In some sense, a stranger’s good name is not at stake. Given these factors, the temptation to “hit and run” outweighs the incentive to coop- erate, since the future casts no shadow. Reputation systems seek to establish the shadow of the future to each transaction by creat- ing an expectation that other people will look back on it. The connections among such people may be sig- nificantly weaker than in transactions on a town’s Main Street, but their numbers are vast in comparison. At eBay, for example, a stream of buyers interacts with the same seller. They may never buy an item from the seller again, but by sharing their opinions about the seller via the Feedback Forum, they construct a mean- ingful history of the seller. Future buyers, lacking per- sonal histories with particular sellers, may still base their buying decisions on a sufficiently extensive pub- lic history. If buyers do behave this way, the sellers’ rep- utations will affect their future sales. Hence, they seek to accumulate as many positive points and comments as possible and avoid negative feedback. Through the mediation of a reputation system—assuming buyers auction sites enable trash to be shuttled across the country and in the process transmuted into treasures. M A R C M O N G EA U