The impact of peer ratings on cooperation: The role of information and cost of rating

• Author: Luca Zarri,Daniela Grieco,Marco Faillo
• DOI: http://doi.org/10.1111/jpet.12384
• Date: 01 April 2020
• Published date: 01 April 2020

J Public Econ Theory. 2020;22:408–432.wileyonlinelibrary.com/journal/jpet408

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© 2019 Wiley Periodicals, Inc.

Received: 1 October 2017

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Accepted: 22 May 2019

DOI: 10.1111/jpet.12384

ORIGINAL ARTICLE

The impact of peer ratings on cooperation:

The role of information and cost of rating

Marco Faillo

1

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Daniela Grieco

2

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Luca Zarri

3

1

Department of Economics and

Management, University of Trento,

Trento, Italy

2

Department of Law Cesare Beccaria,

University of Milano, Milan, Italy

3

Department of Economics, University of

Verona, Verona, Italy

Correspondence

Luca Zarri, Department of Economics,

University of Verona, Via Cantarane 24,

37129 Verona, Italy.

Email: luca.zarri@univr.it

Funding information

University of Verona; Department of

Economics and Management of the

University of Trento; Department of

Economics of the University of Verona

Abstract

In this study, we experimentally analyze the effectiveness of

payoff‐irrelevant peer‐to‐peer ratings as a cooperation

enforcement device in a finitely repeated public goods

game setting. We run two treatments that differ in the

amount of information on own and others' received rating

points provided to the players, whereas, in a third treatment,

we analyze peer approval when assigning ratings to others

is costly. In particular, we wonder whether, even under

anonymity and in the absence of reputational concerns, (a)

players rate others' contribution decisions in the expected

direction and (b) the peer rating mechanisms under study

foster cooperation and welfare. Our findings reveal that, in

the two costless rating treatments, peer rating concerns lead

to higher contributions and efficiency, compared to our

control. Introducing a small fixed cost for assigning rating

points results in a very high percentage of subjects deciding

nottorateothers'behavior,sothatcooperationcannotbe

enforced.

1

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INTRODUCTION

In social dilemmas, a tension exists between individual payoff maximization and maximization

of social welfare. Daily life abounds in examples of collective action problems where everyone

would be better‐off when universal cooperation is achieved, compared to a zero cooperation

outcome, but a strong temptation to free ride on others' efforts arises. These span a series

of seemingly unrelated interaction problems including reducing CO

2

emissions by driving

fuel‐efficient cars, volunteering on school boards or town councils, helping to maintain

the roads and fire departments in our cities and collaborating to teamwork in the office

or within a firm.

Recent research on voluntarily provided public goods has been increasingly shedding light

on the link between individuals' decisions over whether and how much to contribute and

their peers' attitude and behavior towards giving (see e.g., Castillo, Petrie, & Wardell, 2014;

Kumru & Vesterlund, 2010).

1

The advent of social media generates increased opportunities

for peer‐to‐peer fundraising that might benefit charitable organizations: peer‐to‐peer

components that encourage solicitation through individual networks (such as friends asking

friends to give) seem to play a crucial role in driving the success of platforms and tools aimed

at promoting online giving (Castillo et al., 2014). Further examples of environments in which

cooperation may be achieved and sustained via peer‐based mechanisms include peer

assessments in cooperative learning (in education) and teamwork (in the workplace) as well

as community‐based “question and answer”services on the web (e.g., Quora, Yahoo Answers)

or more specialized online communities (e.g., software developers), where users can rate

peers' answers and contributions.

In light of this, in our study, we sought to contribute to the rapidly expanding stream of

experimental literature (reviewed in Section 2) examining the effectiveness of various forms of

sanction‐based and reward‐based institutional arrangements on cooperation by focusing on the

role of decentralized mechanisms based on peer rating.

2

The human desire to get social approval by other people has been extensively studied within

the social sciences. In economics, prominent scholars such as de Mandeville (1714) and Smith

(1759) have shed light on the importance for human beings of being approved of by others. In

the last years, with the advent of social media, our search for peer approval has taken new forms

and we cannot even rule out that new technologies have been magnifying our “need”to be

socially recognized by our peers for who we are (including what we pretend to be in the eyes of

others) as well as for what we do.

3

Therefore, apart from purely strategic and purely altruistic considerations (see on this

Andreoni's [1989; 1990] classical studies), a plausible reason why people might decide to

voluntarily engage in prosocial activities such as contributing to public goods is that they care

about others' views.

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In this study, we test the idea that one's willingness to contribute may

positively and significantly depend on receiving nonmonetary benefits associated with knowing

that other individuals in the group (i.e., other peers) like what she is doing. As a consequence, this

may turn into higher cooperation and welfare, compared to groups in which peer approval plays

no role. Therefore, the core question we address in this paper is the following: does asking

individuals to express their approval of their peers' behavior in a public goods game

environment significantly affect contribution levels?

1

It is interesting to note that, as observed by Dugar (2013), in his pioneering work on collective action Olson (1965) also stressed the potential role played by

social incentives in solving the free riding problem.

2

It is very important to preliminarily make clear that, in all treatments of the experiment we present in this paper, we focus on payoff‐neutral peer‐to‐peer

ratings with a 0–10 range to be used by subjects to rate other players' behavior in the previous stage of the game (the contribution stage), after being informed

that the number of points had to be positively associated with their rating of others' behavior, so that “zero”meant “not positive at all”while “ten”meant

“totally positive”. In this sense, we investigate peer approval of others' behavior. We view our range as broader and more meaningful than the ones used in

closely related studies (such as, e.g., Masclet et al., 2003; see on this Section 3.2), as our subjects were allowed to express both what we may call positive

judgment or “approval”of others' behavior (by assigning a relatively high amount of rating points) and negative judgment or “disapproval”of others' behavior

(by assigning a relatively low amount of rating points).

3

In this regard, Facebook cofounder Sean Parker recently declared that Facebook exploits human weakness and creates a social‐validation feedback loop:“we

need to sort of give you a little dopamine hit every once in a while, because someone liked or commented on a photo.”

4

Recent evidence from the field indicates that social pressure (Della Vigna, List, & Malmendier, 2012) affects giving behavior.

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