Számadó’s paper in Scientific Reports

The paper “Scarce and directly beneficial reputations support cooperation” by Szabolcs Számadó (joint with Flóra Samu and Károly Takács) has been published recently in Scientific Reports.

A human solution to the problem of cooperation is the maintenance of informal reputation hierarchies. Reputational information contributes to cooperation by providing guidelines about previous group-beneficial or free-rider behaviour in social dilemma interactions. How reputation information could be credible, however, remains a puzzle. We test two potential safeguards to ensure credibility: (i) reputation is a scarce resource and (ii) it is not earned for direct benefits. We test these solutions in a laboratory experiment in which participants played two-person Prisoner’s Dilemma games without partner selection, could observe some other interactions, and could communicate reputational information about possible opponents to each other. Reputational information clearly influenced cooperation decisions. Although cooperation was not sustained at a high level in any of the conditions, the possibility of exchanging third-party information was able to temporarily increase the level of strategic cooperation when reputation was a scarce resource and reputational scores were directly translated into monetary benefits. We found that competition for monetary rewards or unrestricted non-monetary reputational rewards helped the reputation system to be informative. Finally, we found that high reputational scores are reinforced further as they are rewarded with positive messages, and positive gossip was leading to higher reputations.

Somogyi’s paper in the International Journal of Industrial Organization

The paper “Prioritization vs zero-rating: Discrimination on the internet” by Robert Somogyi (joint with Axel Gautier) has been published recently in the International Journal of Industrial Organization.

Click here for free access to the article until Nov 15th.

The authors compare two business practices on the mobile internet market, paid prioritization and zero-rating. These practices are tools for the internet service provider (ISP) to alter competition on the content market. Both violate the principle of net neutrality, but the paper shows that their effects on consumer welfare are fairly different. In particular, it finds that a policy banning prioritization (a policy currently followed by the EU and also the US until 2016) can lead to zero-rating (if allowed) and a reduction in consumer surplus. Finally, the paper also shows that despite the fears of net neutrality advocates about excluding lawful content, the ISP can extract more surplus from consumers by privileging the relatively weaker content, at least when asymmetry between content types is limited.