Goodwill Hunting: An Economically Efficient Online Feedback Mechanism for Environments with Variable Product Quality

Most online feedback mechanisms publish unbiased statistics (usually averages) of past ratings. Such mechanisms fail in environments where the same seller sells products of many different qualities, such as marketplaces of used cars and collectibles. This paper presents a novel feedback management mechanism that succeeds in facilitating efficient transactions in such settings. One particularly interesting aspect of this mechanism is that it uses the threat of biased future reporting of quality in order to induce sellers to truthfully declare the quality of their items.