A Product Reputation System

Reputation systems for sellers such as simple blogs have a terrible incentive problem. The seller produces false positive reports and a competitor produces false negative reports. Companies such as PayPal, Amazon and perhaps credit card companies may be in a position to provide a reputation service without these failures.

What such companies know is that money passed from the buyer to the seller. This transaction creates the authority to produce one report—positive or negative. The reports can be in free form and include images but the report is identified as one report at a known price.


Games generally involve pseudonyms or flat out hiring someone to produce a report and keep their mouth shut.

The competitor is the easy case to analyze. The competitor must actually spend the money to buy the product in order to make a false report. This at least limits the amount of harm he can do, incidentally to the monetary benefit of whoever he defames. We need to work thru the perturbation to the supply-demand curves here.

The seller is in a position to make false positive reviews on fake sales. The payments seem legitimate to PayPal and perhaps physical goods are even shipped. When Amazon does the real delivery this fraud is more difficult, but probably still possible. If Amazon takes a cut for profit, inventory and shipping, that puts a cost on this deception. Amazon is in a position to note many deliveries to the same address. To avoid this detection is a cost of this fraud. A service might arise to serve as a shipping address, but the cost increases if the goods are not discarded but reshipped to seller.

I shall think on this. Perhaps the consumer must ignore positive reports.