A Shared Identity Promotes Herding in an Information Cascade Game

Sebastian Berger, Christoph Feldhaus, and Axel Ockenfels 
2018. Journal of the Economics Science Association, 4(1), 63-72

Our research addresses the effect of shared vs. mixed group identities in an information cascade game. We vary whether subjects always choose after a decision maker who shares the same identity or after a decision maker with a different identity. We find that subjects’ inclination to follow their predecessor is stronger in groups uniquely consisting of ingroup members compared to mixed groups. We relate this result to recent social cognition research.

Set road charges in real time to ease traffic

Peter Cramton, R. Richard Geddes and Axel Ockenfels
2018. Nature (Comment), 560, 23-25.

Track vehicles to link tolls with demand and cut congestion, urge Peter Cramton, R. Richard Geddes and Axel Ockenfels.

Dispute Resolution or Escalation? The Strategic Gaming of Feedback Withdrawal Options in Online Markets

Gary E. Bolton, Ben Greiner and Axel Ockenfels
2018. Management Science, 64(9), 4009-4031.

Many online markets encourage traders to make good after an unsatisfactory transaction by offering the opportunity to withdraw negative reputational feedback in a dispute resolution phase. Motivated by field evidence and guided by theoretical considerations, we use laboratory markets with two-sided moral hazard to show that this option, contrary to the intended purpose, produces an escalation of dispute. The mutual feedback withdrawal option creates an incentive to leave negative feedback, independent of the opponent’s behavior, to improve one’s bargaining position in the dispute resolution phase. This leads to distorted reputation information and less trust and trustworthiness in the trading phase. Buyers who refuse to give feedback strategically, even when it comes at a personal cost, mitigate the detrimental impact. It is also mitigated in markets with one-sided moral hazard and a unilateral feedback withdrawal option.