Building Trust in Online Auction Markets Through an Economic Incentive Mechanism

31 Pages Posted: 13 Jan 2017

See all articles by Sulin Ba

Sulin Ba

University of Connecticut School of Business

Andrew B. Whinston

University of Texas at Austin - Department of Information, Risk and Operations Management

Han Zhang

Georgia Institute of Technology

Date Written: January 1, 2003

Abstract

Millions of dollars change hands daily through online auction markets. However, fraud has been on the rise in these markets. Using a game theoretic approach, we propose a design of an economic incentive mechanism, the trusted third party (TTP), to serve the online auction communities. The proposed model addresses both the economic and technological aspects of online auction transactions by assigning a digital certificate to each participant. Thus, each participant’s identity as well as his or her reputation can be established by other market participants. The analytical results demonstrate that when online transactions take place with the assistance of digital certificates issued by a TTP, the most utilitarian course of action for a market participant is to behave honestly.

Keywords: Electronic commerce; Electronic markets; Online auction; Trusted third party; Certification authority; Digital certificate; Trust;

Suggested Citation

Ba, Sulin and Whinston, Andrew B. and Zhang, Han, Building Trust in Online Auction Markets Through an Economic Incentive Mechanism (January 1, 2003). Available at SSRN: https://ssrn.com/abstract=2853905 or http://dx.doi.org/10.2139/ssrn.2853905

Sulin Ba (Contact Author)

University of Connecticut School of Business ( email )

368 Fairfield Road
Storrs, CT 06269-2041
United States

Andrew B. Whinston

University of Texas at Austin - Department of Information, Risk and Operations Management ( email )

CBA 5.202
Austin, TX 78712
United States
512-471-8879 (Phone)

Han Zhang

Georgia Institute of Technology ( email )

Atlanta, GA 30332
United States

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