How to Cope with Fraud of Trusted Third Party in E-commerce: An Analysis Based on Evolutionary Game Theory

With the fast growing of electronic market, fraud has become a top barrier to e-commerce. Subsequently, online escrow service, such as Paypal and Zhifubao, provided by trusted third party (TTP) is considered as an effective method to protect the business from the fraud. However, who will supervise the fraud of the TTP? TTP takes charge of more and more money from buyers. Moral hazards from TTP, such as the high level investment (risky but profitable) using the buyerspsila money, arouse the concern of government. This paper argues the reaction of supervisor and the strategy choice of TTP based on evolutionarily stable strategy (ESS) and replicator dynamic and provides the rational solution.