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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 its
sound ideas and the easy accessibility of its principal results. |
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Reviewer:
Christoph F. Strnadl
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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": |
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