Indirect reciprocity with costly information
Humans are reciprocal animals cooperating with each other even though such behavior is costly. Indirect reciprocity is a mechanism for sustaining cooperation when individuals rarely interact with the same partners; such situations are increasingly ubiquitous in human societies (e.g., anonymous encounters in online marketplaces).
For indirect reciprocity, reputation plays a key role: individuals help others with a good reputation, but not those with a bad reputation. Sharing information about reputations is therefore crucial for indirect reciprocity. In practice, however, it often seems costly to share information about the reputation of individuals.
For example, while Amazon.com adopts a feedback mechanism to assess each seller, customers often do not submit such feedback because for them this involves extra work. More in general, collecting, sharing, and maintaining information is costly, so the availability and quality of information may suffer from a tragedy of the commons. Individuals, or a marketplace as a whole, may try to address these challenges by charging fees before allowing individuals to access reputation information, which can lead to the emergence of a reputation market operating alongside the dynamics of indirect reciprocity.
During the YSSP, I will study cooperation dynamics under indirect reciprocity based on costly reputation information. I will identify the conditions that sustain cooperation and examine the following specific aspects. (1) Individuals may exchange reputation information either through pairwise interactions or through a centralized institution, so I will examine which mode is more efficient. (2) I will study competition among information providers and clarify conditions for the emergence of hubs among them.
(3) I will study how conditions for cooperation change when erroneous reputation information can spread via gossip, or when information sellers have an incentive to cheat information buyers by providing them with inaccurate or false information.