Truthful Feedback for Sanctioning Reputation Mechanisms

For product rating environments, similar to that of Amazon Reviews, it has been shown that the truthful elicitation of feedback is possible through mechanisms which pay buyer reports contingent on the reports of other buyers. We study whether similar mechanisms can be designed for reputation mechanisms at online auction sites where the buyers’ experiences are partially determined by a strategic seller. We show that this is impossible for the basic setting. However, introducing a small prior belief that the seller is a cooperative commitment player leads to a payment scheme with a truthful perfect Bayesian equilibrium.