2. Why is This Field Important?

Reputation mechanisms have initially attracted attention as a mechanism for building trust and fostering cooperation in online trading communities, such as eBay, where more traditional quality assurance mechanisms (commercial law, government regulation, etc.) do not work as well. They have also emerged as an attractive approach for inducing “law and order” in loosely coupled networks of computer systems, such as software agent communities and peer-to-peer networks.

We believe that feedback mechanisms are poised to have a much wider impact on consumer behavior and public opinion formation. Their growing popularity can, therefore, have potentially important repercussions for a variety of business and public policy institutions ranging from marketing and advertising to litigation and the political process.

The following recent events indicate the growing influence of online feedback in business and politics.

  • As early as 1994, the negative publicity generated through online feedback forums regarding an obscure and rather insignificant defect of the first generation of Pentium processors, led to hundreds of reports on the mass media, bad jokes on late-night television, and a $475 million fourth-quarter debit on Intel’s balance sheet (Coe et al., 1995).
  • In December 2002, the vigorous denunciation of Senator Trent Lott’s controversial remarks about Strom Thurmond in online “weblogs” forced the mainstream media (who, remarkably, had made a conscious or unconscious decision to not give publicity to the incident) to take notice and eventually led to Senator Lott’s resignation from his position as majority leader (Economist, 2002).
  • In February 2003, Jeff Bezos, the CEO of Amazon.com decided to cancel all plans for any television or general-purpose print advertising because he believes that his company is better served through word-of-mouth generated through the Internet (Hansell, 2003).

The above examples indicate that online feedback forums can exert powerful influence in an increasing number of social and business activities. They, therefore, represent an emerging social force that needs to be carefully studied, understood, and harnessed for society’s good.
The majority of existing online feedback mechanisms have been developed by a variety of commercial and community groups and based on ad hoc principles and ideas. As these powerful systems proliferate, it is important to conduct rigorous research in order to understand the full potential benefit of these mechanisms for business and society as well as to protect society from potentially harmful consequences of poorly designed feedback mechanisms. Some important questions that such research should attempt to answer include:

  • What is the net impact of these mechanisms in economic efficiency?
  • What is the net impact of these mechanisms in social fairness?
  • Who benefits and who loses from the introduction of a feedback mechanism?
  • Are there domains in which the creation of such mechanisms is particularly beneficial? Are there domains where such mechanisms can be harmful?
  • To what extent do the design details of the mechanism impact the resulting social outcomes?
  • What are the risks related to abuse of such mechanisms?
  • How can such risks be avoided?
  • How should organizations measure and react to online feedback?

In order to answer the above questions, a sustained research effort is needed. This effort requires collaboration among several disciplines, including:

  • Economics. Economists have studied reputation formation and social learning phenomena (in offline settings) for at least twenty years. This body of work is a useful foundation for understanding how these phenomena extend in the online domain.
  • Computer Science/MIS. Online reputations are computed by computer systems that aggregate feedback provided by online community members as well as information implicitly mined from the Web and other public information sources. Some otherwise desirable techniques for aggregating and filtering information may not scale well to large amounts of information. In addition, in many cases it will be desirable to perform calculations in a distributed manner, perhaps in the presence of some system elements that can not be trusted to perform computations as expected. Computer Science/MIS researchers bring experience in the design of scalable, distributed, and secure computation.
  • Sociology and Psychology. It is well-known that human behavior does not conform to the assumptions of full rationality that are pervasive in economic modeling. Psychologists can explain and predict behavior of people in the presence of reputation systems based on emotional as well as cognitive factors. Sociologists can provide insights into the institutional and societal level effects of reputation systems.
  • Management Science. Management scientists will play an important role in understanding the impact of online reputation on a variety of management issues including brand building, marketing, product development and quality assurance.
  • Political Science. Given the growing potential of online reputation mechanisms to influence public opinion, and emerging applications in the structuring of on-line deliberation, the attention of political scientists will be very valuable in understanding the implications of such systems in the political process.

Some private entities will likely benefit directly from research on these issues. Thus, corporations such as eBay should be encouraged to begin funding some of the research that will directly affect their businesses. However, much of the required research is of a more fundamental nature that will benefit many businesses, non-profit organizations and government agencies. It will also help society understand and cope with the broader social and political implications of this phenomenon. Thus, like much scientific research, research on reputation systems is a public good that will be best funded by government.


About Paul Resnick

Professor, University of Michigan School of Information Personal home page
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