Standard economic theory does not capture trust among anonymous Internet traders. But when traders are allowed to have social preferences, uncertainty about a seller’s morals opens t he door for trust, reward, exploitation and reputation building. We report experiments suggesting that sellers’ intrinsic motivations to be trustworthy are not sufficient to sustain trade when not complemented by a feedback system. We demonstrate that it is the interaction of social preferences and cleverly designed reputation mechanisms that solves to a large extent (...) the trust problem on Internet market platforms. However, economic theory and social preference models tend to underestimate the difficulties of promoting trust in anonymous online trading communities. (shrink)

Laboratory studies find a strategic component to moral behaviour that differs in significant ways from common perceptions of how morality works. Models based on a preference for relative payoffs offer an explanation.