Coevolution of trustful buyers and cooperative sellers in the trust game

Details Coevolution of trustful buyers and cooperative sellers in the trust game Coevolution of trustful buyers and cooperative sellers in the trust game

2011-03-14

arxiv.org/abs/1103.2648v1

Computer Science

Networking and Internet Architecture

5 figures

Scientific paper

Many online marketplaces enjoy great success. Buyers and sellers in successful markets carry out cooperative transactions even if they do not know each other in advance and a moral hazard exists. An indispensable component that enables cooperation in such social dilemma situations is the reputation system. Under the reputation system, a buyer can avoid transacting with a seller with a bad reputation. A transaction in online marketplaces is better modeled by the trust game than other social dilemma games, including the symmetric Prisoner's Dilemma. In addition, most individuals participate mostly as buyers or sellers; each individual does not play the two roles with equal probability. Although the reputation mechanism is known to be able to remove the moral hazard in games with asymmetric roles, competition between different strategies and population dynamics of such a game are not sufficiently understood. On the other hand, existing models of reputation-based cooperation, also known as indirect reciprocity, are based on the symmetric Prisoner's Dilemma. We analyze the trust game with two fixed roles, where trustees (i.e., sellers) but not investors (i.e., buyers) possess reputation scores. We study the equilibria and the replicator dynamics of the game. We show that the reputation mechanism enables cooperation between unacquainted buyers and sellers under fairly generous conditions, even when such a cooperative equilibrium coexists with the asocial equilibrium in which buyers and sellers defect each other. In addition, we show that not many buyers may care about the seller's reputation under cooperative equilibrium. Buyers' trusting behavior and sellers' reputation-driven cooperative behavior coevolve to alleviate the social dilemma.

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