Credit Risk, Information and Government

The severe trust crisis has become a crucial challenge for Chinese e-commerce. This paper builds a model based on the imperfect information to examine the credit risk in online market. According to the model employed in the paper, it indicates that the seller in the online market will provide high quality commodities if the price is sufficiently high. And if the seller has high reputation in the market, he will also provide high quality commodities. Meanwhile, the paper extends the model and analyses the function of the government in constructing a better order for Chinese e-commerce. It suggests that the government should strengthen the supervision besides increase the penalty in order to efficiently restrain the sellers' behavior.