Obtaining Reliable Feedback for Sanctioning Reputation Mechanisms
  Reputation mechanisms offer an effective alternative to verification
authorities for building trust in electronic markets with moral hazard. Future
clients guide their business decisions by considering the feedback from past
transactions; if truthfully exposed, cheating behavior is sanctioned and thus
becomes irrational.
  It therefore becomes important to ensure that rational clients have the right
incentives to report honestly. As an alternative to side-payment schemes that
explicitly reward truthful reports, we show that honesty can emerge as a
rational behavior when clients have a repeated presence in the market. To this
end we describe a mechanism that supports an equilibrium where truthful
feedback is obtained. Then we characterize the set of pareto-optimal equilibria
of the mechanism, and derive an upper bound on the percentage of false reports
that can be recorded by the mechanism. An important role in the existence of
this bound is played by the fact that rational clients can establish a
reputation for reporting honestly.
