Promise‐Keeping Reputations in an Investment Game: An Experimental Investigation

ABSTRACT We design a controlled laboratory experiment to mitigate moral hazard problems in livestream shopping when sellers make promises to buyers. In our experiment, the promise‐keeping reputation mechanism allows sellers to send promises to buyers while buyers can observe the sellers' historical promise‐keeping records. Results demonstrate that bare promises under the mechanism significantly enhance trust and trustworthiness. Specifically, bare promises under the promise‐keeping reputation mechanism can build trust quickly between buyers and sellers in the beginning; when sellers have a good reputation for promise‐keeping, buyers will trust sellers more. When sellers' promise‐keeping histories are not recorded, bare promises fail to enhance trust or trustworthiness, as buyers cannot distinguish between trustworthy sellers and opportunistic sellers.