This document discusses using reputation mechanisms to establish trust online without physical interaction between parties. It notes that current approaches try to make dishonest transactions impossible but are impractical. Alternatively, reputation systems publish ratings and make dishonest behavior unappealing by damaging future reputation and business. Existing systems have issues, but second-generation systems aim to incentivize truthful reporting and establish reliable reputations using game theory, allowing trust in applications like e-commerce, monitoring, and inspection.

1. Trust through Reputation Mechanisms Boi Faltings IIF - EPFL

2. Trust in the Internet No physical contact Adverse selection: inappropriate partners Moral hazard: lack of incentive to deliver quality Trust is essential!

3. Current vision of trust Make dishonest transactions impossible (through cryptography, access controls, etc.) Problem: heavy and impractical Fence can have holes

4. A different vision of trust Leverage internet itself to make dishonest behavior uninteresting : Publish ratings and reputation reports Reputation attracts/drives away future customers Losses from bad reputation outweigh benefits from dishonest behavior Eliminates both adverse selection and moral hazard problems

5. $60’000’000’000 Valuation!

6. First-generation reputation systems Existing reputation systems (eBay, Amazon, epinions, tripadvisor): No systematic reports No incentives to report honestly => reputation is very inaccurate!

7. Second-generation reputation systems Control who can leave reports Pay for reports to obtain unbiased statistics Make truthful reporting the most profitable strategy (using game theory) => a reliable basis for trust

8. Applications… E-commerce: rating products and services Monitoring service-level agreements, e.g. for internet service providers Inspection: by automated systems controlled by multiple entities