It is now well known that human behavior does not conform to the traditional economics assumptions of rational maximization of well-defined utility functions.13 Two recent laboratory experiments provide some initial insight into human behavior vis-à-vis feedback mechanisms. Bolton et al. (2002) compare trading in a market with (automatically generated) feedback to a market without and to a market in which the same people interact with each other repeatedly (partners market). They find that, while the feedback mechanism induces a substantial improvement in trading efficiency, it falls short of the efficiency achieved in the partners market. Keser (2002) reports the results of a repeated trust game among strangers with and without the ability to provide
feedback. She finds that the presence of a feedback
mechanism significantly increases the levels of
trust and trustworthiness. Furthermore, efficiency is
slightly higher if trading partners are informed of the
entire distribution of each other’s previous ratings
than if they are informed of each other’s most recent
rating only.