Feedback Loop Failure: Implications for the Self-Regulation of the Sharing Economy

Essay by Abbey Stemler: “Ratings and reviews are the lifeblood of the sharing economy. They provide a reputation proxy and make us feel comfortable jumping into stranger’s cars, sleeping in their beds, and having a meal at their kitchen tables. However, as the fields of psychology, management, and behavioral economics are beginning to tell us, these trust building mechanisms might be flawed. Instead of relying on the wisdom of the crowd, we might be relying on the collective bias of the crowd. This essay examines how proposed theories for regulating the sharing economy depend on accurate feedback mechanisms and argues that this reliance should be questioned, because feedback loop failure occurs in the sharing economy and distorts the risk calculation for participants. This failure can lead to uniformed decision-making and consumer fraud….(More)”