The Market for Evaluations
Chris Avery, Paul Resnick, and Richard Zeckhauser (1999), “The Market
for Evaluations.” American Economic Review 89(3): 564-584.
July 1998 draft version available here.
Recent developments in computer networks have driven the cost of distributing
information virtually to zero, creating extraordinary opportunities for
sharing product evaluations. We present pricing and subsidy mechanisms
that operate through a computerized market and induce the efficient provision
of evaluations. The mechanisms overcome three major challenges: first,
evaluations, which are public goods, are likely to be underprovided; second,
an inefficient ordering of evaluators may arise; third, the optimal quantity
of evaluations depends on what is learned from the initial evaluations.