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Governing Online Shops Selling fakes, punishment mechanism or reputation mechanism?

April 25, 2019
Ma Shuzhong1,2 and Fang Chao1

(1.School of Economics, Zhejiang University; 2.China Academy of Cross-border E-commerce, Zhejiang University)

 

Abstract: Based on the selling fakes behavior of online shops, this article constructs a dynamic game model of incomplete information and examines the governance effects of the punishment mechanism and the reputation mechanism. This article finds that: Firstly, the higher the proportion of opportunistic shops on the e-commerce platform, the stronger the consumer identification ability, the more consumers tend to choose distrust shops; the opportunistic shop will always send fakes to maximize its revenue. Secondly, the punishment for selling fakes is often difficult to achieve its desired results, because the platform does not really want to punish the shop severely. Therefore, consumer rights are often difficult to secure. Thirdly, the reputation mechanism can guide opportunistic shops to operate in good faith, and consumers are more inclined to trust shops. However, the reputation mechanism may not be able to play its role, because of fake reviews, reporting bias and many other issues. This article theoretically explains why online shops selling fakes, which may provide a certain reference for the improvement of e-commerce platforms.


Key Words: E-commerce, Game Theory, Selling Fakes, Reputation Mechanism