Seller bidding in a trust-based incentive mechanism for dynamic E-marketplaces

In this paper, we develop a detailed bidding strategy for selling agents in electronic marketplaces, in a setting where buyers and sellers have incentives to be honest, due to a particular framework for trust modeling. In our mechanism, buyers model other buyers and select the most trustworthy ones as their neighbours to form a social network which can be used to ask advice about sellers. In addition, however, sellers model the reputation of buyers based on the social network. Reputable buyers provide fair ratings for sellers, and are likely to be neighbours of many other buyers. Sellers will provide more attractive products to reputable buyers, in order to build their own reputation. We include simulations of a dynamic marketplace operating using our mechanism, where buyers and sellers may come and go, and show that greater profit can be realized both for buyers that are honest and sellers that are honest.