The Santa Claus Principle
Santa
Originally uploaded by Curtis Castillow.
by Curtis Castillow
It was interesting to discover in Resnick and Zeckhuaser’s article on eBay’s reputation system, that though the system was unreliable and unsound, it still worked. The authors concluded that it worked because people believed it worked. The phenomena that drives the success of eBay’s reputation is the Santa Claus Principle. Let me illustrate.
Logistically, Santa can’t reach every little boy and girl in the world in 24 hours—even if he could travel at the speed of light. Yet, the Santa Claus story works because children perceive it works. Just as children fear that negative behavior will reap large chunks of coal, so likewise, eBay sellers fear that negative feedback will reap lower sells.
Perception is the impetus behind any societal system, whether it’s politics, economics, diplomacy, or children’s dreams of sugar plums and ferries. It was perception that inflated the stock market in 1999 to an all time high, and its perception that will elect our next president. But it must be remembered, however, that perception is a two edged sword that cuts both ways—good and bad. Just as perception raised the market, it could also crash it, or at least, suppress it even though the GNP is up and unemployment is down.
If perception-driven, societal systems are vulnerable to opinion and perception, then it seems eBay is vulnerable too. But to what extent is it vulnerable? It seems it is as vulnerable in proportion to the perception that upholds it. So, how much of it is really driven by perception?
posted by Curtis Castillow @ 9:36 AM
4 comments
4 Comments:
Curt,
Very interesting post. I like your inclusion of perception as a key ingredient in the reputation system discourse. How reliable are feedback systems in providing a valid measure of reputation? Does the feedback system simply provide the perception of reputation?
"...though the system was unreliable and unsound, it still worked. The authors concluded that it worked because people believed it worked."
I think considering what Resnick et al said is important here:
"It is worth noting at the outset that the system need not be theoretically sound in order to work. It may only be necessary that both buyers and sellers believe that the system or some part of the system works. There is little published literature on the effective workings of reputation systems on the Internet..."
1. I think it is important to note Resnick et al said the system may be unreliable and unsound, not necessarily is so. Simply put, because no research exists does not mean that it is so. The most important example of eBay's system functioning reliably and soundly is the buyer or seller who receives four negative feedback comments consecutively. He or she is banned from conducting any further business on eBay. I don't know how often this happens but it does happen.
2. I suppose the theory behind perception ought to include what reputation is based on. Considering the transitive verb to repute: "To consider, think, esteem, reckon (a person or thing) to be, or as being, something." Of course this implies reputation, and its associated levels of trust, depend on (a) the source or (b)frequency. The source because one needs to know if the person posting the feedback is reputable themselves; and also how often is the comment triangulated with other participants?
3. All of this discussion on reputation and trust forms around a concept of community. What does the community develop? Keeping in mind that people are not required to post feedback on eBay, why do they do it? One incentive might be reciprocation. If I post on your account, you will post on mine. So is this system naturally inclined to produce bias that would lead to false perception? If a person genuinely mishandles a transaction, how likely are people to post negative feedback?
Hmm...These are all interesting questions. You've made me think more about the idea of social contract and rule of law. Why do people obey laws? This is the subject of my post and now I see how it relates to perception. I had not made the connection.
Mark
I like your santa-clause-principle analogy. could not have illustrated it better.
cheers,
BH
Very well put. Nice to come up with a clear example and give a name to a principle that others might pick up and talk about. Well done!
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