The Korean Economic Review
On the Prevalence of Online Trade among Strangers: A Game-Theoretic Explanation
Yong-Ju Lee (Samsung Research Institute of Finance)Year 2011Vol. 27No. 2
Motivated by the prevalence of online trade among strangers through consumer-toconsumertransactions, we examine by random matching the theoretical possibility of asocial norm of trust and reciprocity emerging among strangers in the infinitely repeatedbuyer-sender game. Players are completely anonymous and interact only at randomlydetermined times. Based on the study by Kandori (1992), we show that the social norm oftrust and the reciprocation of trust can be sustained in a population of self-interested,anonymous strangers when trust and reciprocity are attached to the community as a whole.Sufficient conditions that support trust and reciprocity as a sequential equilibrium areprovided.