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An Evolutionary Analysis of Buyer Insurance and Seller Reputation in Online Markets

Güth, Werner and Mengel, Friederike and Ockenfels, Axel (2007) 'An Evolutionary Analysis of Buyer Insurance and Seller Reputation in Online Markets.' Theory and Decision, 63 (3). pp. 265-282. ISSN 0040-5833

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Abstract

Applying an evolutionary framework, we investigate how a reputation mechanism and a buyer insurance (as used on Internet market platforms such as eBay) interact to promote trustworthiness and trust in markets with moral hazard problems. Our analysis suggests that the costs involved in giving reliable feedback determine the gains from trade that can be obtained in equilibrium. Buyer insurance, on the other hand, can affect the trading dynamics and equilibrium selection. We find that, under reasonable conditions, buyer insurance crowds out trust, and trustworthiness. © 2007 Springer Science+Business Media, LLC.

Item Type: Article
Uncontrolled Keywords: Trust; online markets; eBay; reputation mechanism; moral hazard; evolutionary game theory
Subjects: H Social Sciences > HB Economic Theory
Divisions: Faculty of Social Sciences > Economics, Department of
SWORD Depositor: Elements
Depositing User: Elements
Date Deposited: 27 Mar 2013 16:22
Last Modified: 15 Jan 2022 00:49
URI: http://repository.essex.ac.uk/id/eprint/5811

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