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The anonymity of the Internet creates ample opportunities for misbehavior when conducting transactions. In contrast to conventional marketplaces, the Internet provides no social system to create or promote trust between buyers and sellers. This paper introduces the concept of a community-based responsibility system that sustains trust even for a single anonymous transaction, and within game theory, proves the sustainability of certain strategies within this system.Buyers or sellers are supposed to be members of certain communities. When two agents meet, they will only trade with each other if the other party belongs to a “trusted” community. A single transaction is played as one round of the “Prisoners’ Dilemma” game. An agent who considers himself cheated by the other party may appeal to his community at cost C. His community will investigate at the other party’s community and will demand a compensation F to be paid to the cheated agent, if correct. If the cheating community refuses to pay, the cheated community refrains from doing business with that particular community in the future. The cheating community, in turn, will demand F from the cheating member, and will expel a non-paying cheater.The paper proves that the system can provide a perfect equilibrium, and is able to maintain a positive cash flow under certain conditions.Despite the simple strategy of communities in this form of the iterated “Prisoner’s Dilemma” (referred to as “FRIEDMAN” in [1]). I liked the paper because of itssound ideas and the easy accessibility of its principal results.
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Reviewer:
Christoph F. Strnadl |
Review #: CR125633
(0201-0056) |
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| 1) |
Axelrod R. The Evolution of Cooperation.Basic Books, New York, NY, 1985.. |
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| Other reviews under "Electronic Commerce": |
Date |
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Do electronic marketplaces lower the price of goods?
Lee H. Communications of the ACM 41(1): 73-80, 1998. Type: Article |
Feb 1 1999 |
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On-line profits
Keen P., Ballance C., Harvard Business School Press, Boston, MA, 1997. Type: Book (9780875848211) |
May 1 1998 |
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Secure electronic transactions
Loeb L., Artech House, Inc., Norwood, MA, 1998. Type: Book (9780890069929) |
Jul 1 1998 |
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