Mathematical Modeling of Insurance Mechanisms for E-commerce Systems
Electronic commerce (a.k.a. E-commerce) systems such as eBay and Taobao of Alibaba are becoming increasingly popular. Having an effective reputation system is critical to this type of internet service because it can assist buyers to evaluate the trustworthiness of sellers and it can also improve the revenue for reputable sellers and E-commerce operators. The authors formulate a stochastic model to analyze an eBay-like reputation system and propose four measures to quantify its effectiveness: new seller ramp up time, new seller drop out probability, long term profit gains for sellers and average per seller transaction gains for the e-commerce operator.