The joint beta distribution with refund rate in online C2C trust building: A theoretical study on Taobao

Lack of trust is one of the fundamental reasons for losing customers from “faceless” e-commerce websites in the consumer-to-consumer market. In order to combat problems with dishonest market participants, a reputation system based on the trustworthiness of sellers has been widely established by the service provider. Traditionally this trust model is mainly based on feedback mechanism while neglecting the other important factors, such as, refund rate, which may lead to transaction risks in the new transaction. This paper proposes a global reputation rating method by using joint beta probability density functions to combine positive feedback rating and refund rate. The new trust model has the advantage of tractability and scalability as well as its theoretical sound basis on statistics.