Enforcing Truthful-Rating Equilibria in Electronic Marketplaces

Reputation-based mechanisms and policies are vulnerable to the submission of untruthful ratings. In this paper, we define and analyze a game-theoretic model that captures the dynamics and the rational incentives in a competitive e-marketplace in which providers and clients exchange roles. We also study how we can enforce equilibria where ratings are submitted truthfully. We employ a mechanism prescribing that each service provision is rated by both the provider and the client, while this rating is included in the calculation of reputation only in case of agreement. First, we analyze the case where fixed monetary penalties are induced to both raters in case of disagreement. We prove that, under certain assumptions on the initial conditions, the system is led to a stable equilibrium where all participants report truthfully their ratings. We also investigate the introduction of non-fixed penalties to provide the right incentives for truthful reporting. We derive lower bounds on such penalties that depend on the participant’s reputation values. Thus, by employing a punishment that is tailored properly for each participant, this approach can limit the unavoidable social welfare losses due to the penalties for disagreement.