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An incentive mechanism to promote honesty among seller agents in electronic marketplaces

Author

Listed:
  • Mohammad Riazati

    (Amirkabir University of Technology)

  • Mehdi Shajari

    (Amirkabir University of Technology)

  • Siavash Khorsandi

    (Amirkabir University of Technology)

Abstract

With the rapid development of online shopping, usually, sellers and buyers have virtual identities, which are not verified beforehand. As a result, establishing trust between sellers and buyers is much harder than before where sellers and buyers would meet face to face before making any transaction. In this work, we propose a method for the marketplace management under anonymous buyers and sellers which makes the honest behavior the most profiting action for rational sellers. In this method, the market operator adopts an honesty promoting mechanism based on direct reward and punishment in which being honest is the most profitable action. In most online marketplaces, a fee or commission is deducted from every payment before settling the account up with the seller. As such, with the dynamic adjustment of the fee, it is possible to reward or punish the seller. The correctness of this method is proven using mathematical models. The apparatus, processes, and algorithms for the marketplace are elaborated in detail so that market operators can easily apply the method in their existing marketplaces.

Suggested Citation

  • Mohammad Riazati & Mehdi Shajari & Siavash Khorsandi, 2019. "An incentive mechanism to promote honesty among seller agents in electronic marketplaces," Electronic Commerce Research, Springer, vol. 19(1), pages 231-255, March.
    • Handle: RePEc:spr:elcore:v:19:y:2019:i:1:d:10.1007_s10660-018-9298-7
    DOI: 10.1007/s10660-018-9298-7
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    Cited by:

    1. Md. Imran Hossain & Md Shah Azam & Mohammed Quaddus, 2021. "Small firm entry to e-marketplace for market expansion and internationalization: A theoretical perspective," Journal of International Entrepreneurship, Springer, vol. 19(4), pages 560-590, December.
    2. Jiaxin Wang & Shaohan Cai & Qinghong Xie & Lili Chen, 2022. "The influence of community engagement on seller opportunistic behaviors in e-commerce platform," Electronic Commerce Research, Springer, vol. 22(4), pages 1377-1405, December.

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