Motivation
No doubt that everyone has the experience of shopping online nowadays, especially during the pandemic. There are nearly 2 million small and medium businesses worldwide selling on Amazon and over 4,000 items sold on Amazon per minute on average. However, although online shopping has brought a lot of convenience to our lives, it is also very common that we get something that has bad quality or that is even not what we want due to fake ads or fake comments about the product. However, on the sellers’ side, is it always a good choice to make fake ads and comments to attract get more consumers?
Analysis
Here’s a game theory module for online shopping, which is somehow similar to the games we saw in class. Let’s consider consumers and sellers to be two players of the game. Also, the buying and selling of each product happen simultaneously. Below is a table for this game.
| Consumer \ Seller | Be honest | Cheat |
| Buy the product | (a,b) | (-c,e-d) |
| Not to buy the product | (0,0) | (0,-d) |
There are four cases in this table. First, the consumer chooses to buy the product and the seller chooses to be honest and not create any fake ads or comments on the product. The payoff for the consumer would be a and the payoff for the seller would be b in this case. Second, the consumer chooses not to buy the product and the seller chooses to be honest. Since there is no trade happens in this case, the consumer and the seller would not get anything. The payoffs for both of them are 0. Third, the consumer chooses to buy the product but the seller chooses to cheat by making fake ads or comments. In this case, the payoff for the consumer would be a negative number -c since the consumer does not get what he/she expected to get. The payoff for the seller would be e-d, where e-d is greater than b and d is the cost of making fake ads and comments. The last case is that the consumer chooses not to buy the product and the seller chooses to cheat. This time, the payoff for the consumer would be 0 since no trade happens, but the payoff for the seller would be -d since the seller needs to pay for creating fake abs and comments.
From the table, we can see that the dominant strategy for consumers would be buying the product and the dominant strategy for the sellers would be cheating. Research shows that this would lead to a Nash equilibrium of choosing (buy, cheat) and is harmful to the benefit of consumers.
However, the above analysis only considers the game as a regular simultaneous. Don’t forget that this is actually a repeated game that can be played out over and over again. In repeat games, “Each player will determine their strategies or moves taking into account all previous moves up until that moment. Also, since each player will take into account this information, they will play the game based on the behavior of the opponent, and therefore must consider also possible changes in the behavior of the latter when making choices”(Gallego, 2017). This means that in order to maximize the payoff, consumers are more likely to buy products from sellers whom they have previously gained a good consumer experience from. Hence, always being honest would help sellers retain their customers and get more profit in the future since otherwise, (Not to buy the product, Cheat) would happen and sellers would get a negative payoff in this case.
Conclusion
Based on the above analysis, always being honest and never making fake abs and comments is the best choice for sellers since this is good for long-term development and beneficial to both sellers and consumers.
References
Gallego, L. (2017, April 24). Game theory III: Repeated games. Policonomics. Retrieved November 17, 2022, from https://policonomics.com/lp-game-theory3-repeated-game/
Mohsin, M. (2022, August 10). 10 amazon statistics you need to know in 2022 [Aug 2022 update]. Oberlo. Retrieved November 17, 2022, from https://www.oberlo.ca/blog/amazon-statistics
Sun, H. (2021). Analysis on the problems in online shopping under prisoners dilemma. Proceedings of the 2021 International Conference on Enterprise Management and Economic Development (ICEMED 2021). https://doi.org/10.2991/aebmr.k.210601.059
Xue, R.-na, & Zhao, H. (2017). Analysis on credit construction of the electronic commerce platform by Evolutionary Game. 2017 3rd International Conference on Information Management (ICIM). https://doi.org/10.1109/infoman.2017.7950349