Trust as the basis of coalition formation in electronic marketplaces

Abstract

Despite the fact that social networks are ubiquitous on the Internet, only few websites exploit the potential of combining user communities and online marketplaces. Not many platforms allow users to engage in a phenomenon called “group buying”—buyers joining groups, or coalitions, to bundle their purchasing power towards sellers.We argue that this may be due to a lack of face - to - face interaction on the Internet; often, users do not know which other users to trust, which makes them suspicious of engaging in online business, in particular if many unknown other parties are involved. This situation, however, can be alleviated by leveraging the social networks of users: based on who a user knows and is connected to, a trust metric — for example, the TrustWebRank metric developed by us — can be computed to assess who else may be considered trustworthy to that user. In this paper, we build a simple agent - based model of coalition formation among agents in the setting of group buying in an electronic marketplace. In this model, agents use their trust relationships in order to determine who to form coalitions with. We show that this leads agents to experience high utility and that agents are able to learn who is trustworthy and who is not, even when they have no initial knowledge about the trustworthiness of other agents. This work may provide the foundation for a real - world application of an online coalition formation platform for e - commerce built on a social networking platform such as Facebook.