Abstract:

The formation of trust among those participating in an on-line market is an important subject, especially in a C2C market that one can enter and leave easily and in which one can easily change one’s identity. Whether participants can trust each other or not will influence the continuation of a market. We therefore discuss the formation of trust in on-line transactions. We believe that a reputation management system is the most effective system for trust formation system. We developed a computer simulation model that describes online transactions with a reputation management system used to share information concerning the reputations of consumers. Its design was based on an agent-based approach used in “prisoner’s dilemma” game theory. Simulation results indicate that a positive reputation system can be more effective than a negative reputation system. The results should provide important suggestions useful in designing a reputation system for online transactions.

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proceedings