| dc.description.abstract | This paper is theoretical analysis of game theory equilibrium concepts to discuss with incomplete information in reputation mechanism and online trading. Therefore, we develop models that aim to capture the reputation mechanism and online trading. We divided into three topics, the results are as follows:
About the first topic, we discuss ‘the Exploration of Reputation Mechanism in Online Trading’. We assume seller and buyer a selection of online transactions, and seller’s type is his private information. We find that even if there is no ＂reputaion mechanism＂, there will continue to be traded and an opportunistic seller will cheat. After considering the class of binary reputation mechanism where buyers can only report the outcome of a transaction as ‘positive’or‘negative’, the reputation induce current cooperation using the threat of future punishment following negative reports, about the seller’’s current behavior. One important result of the topic, the mechanism is to be useful, not the mechanism itself, but sellers willing to honest transactions on the online trading.
About the second topic, we discuss ‘Connecting Equilibrium Concepts in Asymmetric Information−the Market for Online Transactions’. The topic builds a two-period signaling game to study whether or not the ‘Ordinary’ long run seller has sufficient incentive to gain credibility for his second sale by delivering the good in the first period. We assume that short-run (one-shot) buyer is uncertain about the seller’’s type, and whether or not the seller will be in the market in the second period is also seller’s private information. This model can be viewed as a dual model of Kreps and Wilson (1982). Contrary to the uniqueness results in Kreps and Wilson, we have multiple equilibrium paths passing Intuitive Criterion. Hence, in order to obtain a unique equilibrium path, we must apply D1 Criterion and require strategically stable. Therefore, we can tell the discrepancy under each type of equilibrium concepts under asymmetric information. We also apply Gambit software to get numerical simulation of all pure strategy Nash equilibria of this model. In the unique strategically stable equilibrium, when the probability of an ‘Ordinary’ short run seller is sufficiently low, the outcome is that the ‘Ordinary’ long run seller has sufficient incentive to gain credibility for his second sale by delivering the good in the first period. Hence, concern for reputation can encourage sellers to adopt honest delivery behavior, thereby benefiting the market for online transactions.
About the final topic, we discuss ‘Online Trading with Different Degrees of Trade Frequency Revelation’. The topic applies the model of the previous research to study the impact of different degrees of trade frequency revelation. Whether or not the seller will be in the market in the second period is either public information or seller’s private information. In the unique sequential equilibrium, when the probability of the second transaction is high, introducing a feedback system increases the total trade volume and shipping. However, when the probability of the second transaction is low, with high probability of ‘Honest’ seller, introducing a feedback system decreases the total trade volume if neither buyer nor seller knows the second transaction for sure. Hence, concern for reputation cannot encourage ‘Ordinary’ seller to adopt honest delivery behavior.
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