ESRC Centre for Economic Learning and Social Evolution
Abstract
Often information structures are such that while individual reputation building is impossible
groups of agents would have the opportunity of building up a reputation. We experimentally
examine whether groups of sellers in markets that suffer from moral hazard are able to build
up reputations and, thus, avoid market breakdown. We contrast our findings with situations
where sellers alternatively can build up an individual reputation or where there are no
possibilities for reputation building at all. Our results offer a rather optimistic outlook on
group reputations. Even though sellers only receive some of the reputation benefits of
withstanding short-run incentives to exploit trust, they are able to overcome the dilemma and
successfully exploit the information structure
