Reputational Commons

The concept of reputational commons refers to the idea that reputation can be a means to solve the tragedy of the commons, the concept that humans inevitably overexploit public resources, destroying the resources. Reciprocity can facilitate cooperation. Reciprocity is either direct (I help you, and you help me later) or indirect (I help someone who has helped others—someone who has a reputation for helping). A person’s reputation is a score that members of a social group update whenever they see the person interacting or hear about the person’s social interactions. Reputation is the current standing the person has gained from previous investment or refusal of investment in helping others. A good reputation pays off by attracting help from others, even from strangers, if the recipient’s reputation is known. Any costly investment in the well-being of others (e.g., direct help, donations to charity, investment in averting climate change, etc.) can improve a person’s reputation, which can be used as a currency for future social exchange. This entry discusses reputation as a strong driver of cooperation and scoring as a basis for updating reputation. Cooperation can be a means to improve corporate reputation. For instance, national fishing fleets can enhance corporate reputation by following restrictive rules to reduce overfishing, while airlines, power companies, and other strong carbon dioxide emitters may enhance corporate reputation by changing to technology with less carbon dioxide output.

Reputation as a Driver of Cooperation

Reputation can help solve the tragedy of the commons, a term popularized by biologist Garrett Hardin. Experimental economists have developed an experimental paradigm to study the social dilemma that emerges when the interest of the group is in conflict with the interest of each individual—the public goods game. An example is that each of four subjects are asked in each round to invest $1 or nothing in a common pool. The money in the pool is doubled and redistributed among the four players, irrespective of whether they contributed. Because noncontributors always earn more than contributors, contributions quickly decline, and nobody earns anything, although each person could have earned $1 net in each round had they all contributed. Numerous public goods game studies have proven Hardin right, mirroring the human inability to, for example, avoid overexploiting fish stock or generating dangerous climate change by unlimited use of fossil energy.

If the public goods game is alternated with a game in which players need to have a good reputation in order to receive money, for example, the indirect reciprocity game, they do not dare to destroy their reputation by refusing to contribute to the public goods pool. They contribute to the public pool at a high level, earning a lot of money, as long as they know that there might be further rounds of the game in which reputation matters. The tragedy of the commons is resolved. When players learn that there will be no further rounds of indirect reciprocity, cooperation in the public goods game collapses immediately. Only the pending risk of further rounds of a game in which reputation matters rescues the commons.

It does not matter whether subjects are asked to invest in a pool that will be redistributed among them, used to stabilize the climate, or donated to the United Nations Children’s Fund; the subjects invest in the pool as long as they know that their reputation is at stake. Having a bad reputation from not having invested in the pool is immediately “punished” by being refused help in the indirect reciprocity game, even by subjects who do not invest in the pool themselves when anonymous. Reputation is a strong driver of human cooperation.

“Scoring” as a Basis for Updating Reputation

Reputation can be conceptualized as an image score, which increases with each act of helping by one point and is decreased by one point after each act of refused help. Cooperation by indirect reciprocity can evolve if we help only those people who have a positive image score. This prediction could be verified by experimental games with human subjects. Image scoring has somewhat “unfair” consequences, because an individual’s image score decreases even when he or she refuses help to someone who does not deserve it. Standing strategies avoid this effect. An individual receives help when he or she is in good standing. The individual is in good standing not only when he or she has helped someone but also when he or she refuses help to someone who is in bad standing. An individual is in bad standing when he or she refuses help to someone who is in good standing.

Experiments designed to determine whether subjects used either the standing or the scoring updating rule used a simple test scenario: Subjects were asked to give money to someone who had refused to help someone else who had never helped anybody. According to “standing,” they would help the person. The fact that they refused help is evidence for a scoring strategy.

The explanation for the subjects’ use of scoring might be that a standing strategy needs to know whether a “no” of the current recipient given to his former social partner was justified to be in good standing. If preceded by a “no” of the partner’s previous partner, this person’s decision to his previous partner must be known, and so forth, to determine whether the current recipient is in good standing because his previous “no” was justified. Missing the information about only one of these interactions would render the standing rule useless. The scoring strategy does not suffer from missing information: A highly positive image score is still positive if one previous interaction is not known. So, in reality, a scoring rule for updating a person’s reputation is the safer mechanism.