The Role of Feedback in Finitely Repeated Trading Behaviours.
Keywords:
Reputation , Feedback Mechanism, Finitely Repeated Game, ExperimentsAbstract
This paper investigates the effect of feedback systems and exogeneous shock in the finitely repeated game. We ran three treatments in the experiments, namely, the stranger market (control), the feedback market and the partner market. In the stranger market, a buyer and a seller were rematched in every round. In ยthe feedback market, the setting was similar to that of the stranger market, except the buyers were provided with seller’s history. Buyers and sellers play with the same partner throughout the experiment in the partner market. The stranger and partner market enables us to observe the different between direct and indirect feedbacks. The results show that, first, feedbacks can increase cooperation. Second, direct and indirect feedbacks yield indifferent results. Trading efficiency and the number of buyer’s order are not statistically different between those two feedback sources. Lastly, we find that the exogeneous uncertainty does not have a strong effect on buyers’ decision.
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