Electronic communication and social networks

3 Questions: Does the internet weaken community? Because people replace in-person relationship with time spent online and out of the public realm? Does the internet transform community? Is a new online ‘virtual community’ emerging that allows people to participate in trans-local communities, freed of the bonds of geography? Does the internet enhance community? By adding new forms of communication with which to sustain relationships?

The Production of Trust in Online Markets Peter Kollock, 1999 Study of Ebay What is trust, and why is it important? Trust is key to social exchange (confidence that your favor will be repaid)

Online Auctions Huge marketplace of buyers and sellers—all sorts of goods available Extension of old usenet ‘forsale’ lists Commodities, clothing, art cheap and expensive goods

Online Social Dilemmas “Unsecured exchange” = Social Dilemma Behavior that is rational for the individual results in irrational collective behavior Informal online transactions offer great temptation to cheat! Risk: No one will be willing to trade in this environment!

Solutions Exogenous: Third Party Enforcers Emergence of Paypal – an escrow service Reputation Systems negative feedback (blacklists) can be wrongly accused can adopt a new identity positive feedback More effective

Effect of reputation on prices (2001) Highly positive reputation (10+ positive comments) increases sale price somewhat (3.4%) Each negative comment reduces price by 1% Effects less pronounced on low-priced items Reputation is an individually valuable commodity on ebay… Reputation system makes the ebay community work

What makes it work? Other people’s experience predict your experience Hard to change identity (escape negative feedback)