On the online auction site eBay, by convention, sellers do not ship goods to winning bidders until after they have received payment, so there is an opportunity for sellers to take advantage of bidders' trust. Realizing this, the designers of eBay created a system that relies on self-enforcement using reputation. Several recent studies have found that bidders give little or no reward to sellers who have better reputations. I show that in fact, sellers are strongly rewarded for the first few reports that they have behaved honestly, but marginal returns to additional reports are severely decreasing.

Prior research finds that controls that induce cooperation among collaborators on a project increase trust, and that this increased trust increases subsequent cooperation among collaborators. We extend this work by investigating how controls influence cooperative behavior in two settings. The first is an interactive setting where people work together and can benefit from each other's work. The second is a non‐interactive setting where people do not work together directly but where behavior can be observed. We propose that because controls are likely to engender greater trust and reciprocity in interactive settings than in non‐interactive settings, the effect of controls on future cooperative behavior will be greater for controls in interactive settings than for controls in non‐interactive settings. We find that controls in both settings increase future cooperative behavior, but the effect is significantly greater in interactive settings (where reciprocity and trust are more likely to develop). Furthermore, this increased cooperation is observed in an uncontrolled task, suggesting that the control fosters trust in others rather than trust in the control. These findings suggest that the benefits of controls are more substantial in work environments characterized by extensive teamwork and where employees benefit from each other's work.