Designing On-Line Mediation Services for C2C Markets

Abstract

This paper proposes an on-line mediation services (OMS) mechanism to alleviate the consequences of asymmetric information for traders in C2C markets. In an adverse-selection setting, the mechanism facilitates on-line transactions by (1) inducing traders to negotiate efficiently in the presence of ex post discrepancy, and (2) enabling sellers with higher probability of selling a high-quality product to signal their superiority and enjoy a price premium. The mechanism can also be implemented as a profitable business model.

Keywords:

• C2C market
• information asymmetry
• negotiation
• on-line mediation services