Design of a Mechanism for Promoting Honesty in E-Marketplaces

In this paper, we explore the use of the web as an environment for electronic commerce. In particular, we develop a novel mechanism that creates incentives for honesty in electronic marketplaces where human users are represented by buying and selling agents. In our mechanism, buyers model other buyers and select the most trustworthy ones as their neighbors from which they can ask advice about sellers. In addition, however, sellers model the reputation of buyers. Reputable buyers provide fair ratings of sellers, and are likely to be neighbors of many other buyers. Sellers will provide more attractive products to reputable buyers, in order to build their reputation. We discuss how a marketplace operating with our mechanism leads to better profit both for honest buyers and sellers. With honesty encouraged, our work promotes the acceptance of web-based agent-oriented e-commerce by human users.