| Abstract: |
The appearance of the Internet reduces transaction costs greatly, and brings
the boom of online markets. While we are trying to regard it as the most
realistic approximation of perfect competition market, the asymmetric
information and a series of problems caused by it stop us from dreaming. As
the old saying goes, there is no free lunch. This summer witnessed the
collapse of the reputation system in Taobao, the biggest online transaction
website in China. In fact, during the evolution of mechanisms in online
markets, reputation, punishment and barriers to entry have been established in
turn. What do we pay for maintaining these mechanisms? In which circumstance
will they be effective? In this paper I try to build a series of models within
the principal-agent frame- work and repeated games to explain why and what we
should pay for asymmetric information while enjoying shopping online.
Specifically, these mechanisms are considered step by step and their boundary
validation conditions are discussed. Finally, as the conclusion indicates, the
more range that a mechanism is effective, the more opportunity cost should be
paid as a rent for information. |