Designing On-Line Mediation Services for C2C Markets

Xia Zhao, Fang Fang, and Andrew B. Whinston
International Journal of Electronic Commerce,
Volume 10, Number 3, Spring 2006, pp. 71.

Abstract: This paper proposes an on-line mediation services (OMS) mechanism to alleviate the consequences of asymmetric information for traders in C2C markets. In an adverse-selection setting, the mechanism facilitates on-line transactions by (1) inducing traders to negotiate efficiently in the presence of ex post discrepancy, and (2) enabling sellers with higher probability of selling a high-quality product to signal their superiority and enjoy a price premium. The mechanism can also be implemented as a profitable business model.

Key Words and Phrases: C2C market; information asymmetry; negotiation; on-line mediation services.