The Dynamics of the Electronic Market: An Evolutionary Game Approach

Abstract

The capabilities afforded by network technologies have facilitated the growth of electronic commerce. However, online frauds pose serious challenges to the further adoption of the electronic market. In order to promote trust and reduce transaction risks, various trusted third parties have emerged and new models have been proposed. Will people use the trusted third parties while conducting online transactions? How will the electronic market evolve? This research attempts to identify the different equilibria of the electronic market using an evolutionary game theoretic approach and to explore the best strategy to do transactions in the electronic market. Also, the work provides a theoretical justification to the emergence and necessity of trusted third parties for electronic transactions.Key wordsElectronic MarketTrusted Third PartyMarket EvolutionEvolutionary Game TheoryEvolutionarily Stable Strategy