The Effect of Reputation to the Moral Hazard in C2C E-Market with Game Theory

Fangjun Mu

Management School, Jinan University, Guangzhou, China.

DOI: 10.4236/ajor.2015.55030                

Abstract

It is well known that the reputation is the basis of a seller to survive and gain trust from customers in a competitive business environment. But as the existence of information asymmetry between buyer and seller, the moral hazard problem is the key obstacle that impedes the benefits of related shareholders and reduces the efficiency of total market. It is crucial to design a control mechanism to avoid the negative impact of moral hazard. This paper studies the principal and agent relationship between buyer and seller in C2C e-market; because of the influence of information asymmetry, many customers suffered from being cheated by sellers with defective products in practice. These frequent cases will deteriorate long term relationship between sellers and buyers. Here we focus on the analysis of the causes of moral risks and the effect of reputation on oral risk with repeated game theory. The purpose of this paper is to help both firms and customers effectively avoid morality risk and realize a win-win situation.

Keywords

C2C E-Commerce, Moral Hazard, Reputation Model, Game Theory

Conflicts of Interest

The authors declare no conflicts of interest.

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