Eliminating the cyber 'lemons' problem with the e-reputation in e-commerce market: theoretical model and practice

Author:
  • YPYong Pan
    Yong Pan
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Abstract
Well reputation has a very important effect in eliminating 'lemons' problem that results from informational asymmetry. Its essence is to establish the trust between buyers and sellers. Based on the 'lemons' principle put forward by US economist George Akerlof who is one of Nobel Economics Prize Laureates in 2001, this paper set up an e-reputation model in e-commerce market, and analyse the mechanism of the e-reputation in order to offer a strategic thought for eliminating the cyber 'lemons' problem with the e-reputation. The author also puts forward some ideas and concepts such as 'separating equilibrium', 'e-reputation rent' and 'chains of e-reputation'. For providing empirical evidence, the paper discusses the cases from AUCNET (Japan) and TAOBAO (China).