Temptation and Contribution in C2C Transactions: Implications for Designing Reputation Management Systems

A reputation management system can promote trust in transactions in an online consumer-to-consumer (C2C) market. We model a C2C market by employing an agent-based approach. To discuss the characteristics of goods traded on the market, we define temptation and contribution indexes based on the payoff matrix of a game. According to the results of a simulation conducted with the model, we find that a positive reputation management system can promote cooperative behavior in online C2C markets. Moreover, we also find that such a system is especially effective for an online C2C market where expensive physical goods are traded, whereas a negative reputation management system is effective for an online C2C market where information goods are traded.