The Dynamics of Trust and Trustworthiness on EBay. An Evolutionary Analysis of Buyer Insurance and Seller Reputation
AbstractApplying 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. 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.
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Bibliographic InfoPaper provided by Max Planck Institute of Economics, Strategic Interaction Group in its series Papers on Strategic Interaction with number 2006-03.
Length: 18 pages
Date of creation: Jan 2006
Date of revision:
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-02-26 (All new papers)
- NEP-BEC-2006-02-26 (Business Economics)
- NEP-EVO-2006-02-26 (Evolutionary Economics)
- NEP-EXP-2006-02-26 (Experimental Economics)
- NEP-IAS-2006-02-26 (Insurance Economics)
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