The Impact Of Rating Systems On Subcontracting Decisions A Transaction Cost Analysis
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Overview: This research paper published by Stanford University investigates how different types of rating mechanisms can affect transaction costs in business-to-business electronic commerce. In consumer electronic marketplaces, where the asset-specificity of the transactions is generally low, simple un-weighted rating mechanisms have been shown to increase trust and therefore also decrease the transactions costs associated with opportunistic behavior. However, the paper argues that if a reputation mechanism is to decrease the transaction costs for highly asset specific transactions, it is necessary that the rating mechanism account for the relationship between the user and the rater.