Designing Mechanisms for E-Commerce Security: An Example from Sealed-Bid Auctions

Wenli Wang, Zoltán Hidvégi, and Andrew B. Whinston
International Journal of Electronic Commerce,
Volume 6, Number 2, Winter 2001-2002, pp. 139.

Abstract: The use of computing technology is a necessary but not sufficient approach to enhancing e-commerce security. It should be supplemented by the application of economic mechanisms to design e-processes that discourage the exploitation of security weaknesses. Mechanisms that function well in traditional commerce should be updated to accommodate new problems raised in e-commerce, such as the lack of authentication. As an illustration, thiezezs research focuses on on-line auction mechanisms and develops a Leveled Partition Set (LPS) protocol for multi-unit sealed-bid auctions. LPS prevents on-line false-name bidding whereby bidders increase their utility by splitting their bids for a large bundle to several smaller bundles under false identities.

Key Words and Phrases: Economic mechanisms, electronic commerce, information system, multi-unit auction, on-line auction, security.