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A game-theoretic model for the role of reputation feedback systems in peer-to-peer commerce

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  • Wang, Yan
  • Yang, Jian
  • Qi, Lian

Abstract

We propose a dynamic game-theoretic model to study how a reputation feedback system affects a peer-to-peer (P2P) trading platform. Continuums of buyers and sellers with bounded rationalities are paired to trade periodically. Sellers have private knowledge on their own types that encode tendencies to cheat. Their reputation scores are, on the other hand, visible to all and periodically updated by their trading partners. A buyer can use a seller's score to assess the latter's characters and decide whether to trade. Using a continuity-based fixed point theorem, we first establish the existence of equilibria that convey information on traders' behaviors as well as the type-score composition on the market. We then look into a special case which, for model tractability, includes two types of sellers with two score levels. Besides the proportion of prone-to-cheating sellers, it indicates that how much sellers value their future payoffs also plays a major role in determining the prevalence of online frauds. Therefore, reputation feedback systems are especially beneficial under high trading volumes, which can in turn, for instance, be facilitated by attracting more buyers to the online marketplace.

Suggested Citation

  • Wang, Yan & Yang, Jian & Qi, Lian, 2017. "A game-theoretic model for the role of reputation feedback systems in peer-to-peer commerce," International Journal of Production Economics, Elsevier, vol. 191(C), pages 178-193.
    • Handle: RePEc:eee:proeco:v:191:y:2017:i:c:p:178-193
    DOI: 10.1016/j.ijpe.2017.06.012
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    References listed on IDEAS

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    Cited by:

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    2. Li, Feng & Du, Timon C. & Wei, Ying, 2021. "With whom should I work? Ratings consideration for partner selection in a P2P supply chain network," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 152(C).
    3. Yunke Mai & Bin Hu & Saša Pekeč, 2023. "Courteous or Crude? Managing User Conduct to Improve On-Demand Service Platform Performance," Management Science, INFORMS, vol. 69(2), pages 996-1016, February.
    4. Gordon Burtch & Yili Hong & Senthil Kumar, 2021. "When Does Dispute Resolution Substitute for a Reputation System? Empirical Evidence from a Service Procurement Platform," Production and Operations Management, Production and Operations Management Society, vol. 30(6), pages 1565-1582, June.

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