When e-commerce transactions go bad, the Fair Reputations module uses game theory to attempt to arrive at a fair solution.
Fair Outcomes, a provider of technology solutions that aid in negotiations,
has released the test version of Fair Reputations, a solution designed to
resolve disputes over e-commerce transactions and repair damage caused by
negative online feedback. Fair Reputations is a module of the company's Fair
Proposals bargaining system.
Jim Ring, co-founder and CEO of Fair
Outcomes, said Fair Reputations uses aspects of game theory to help resolve
disagreements between online buyers and sellers. "Game theory is a branch
of economics that involves developing models of how people bargain with one
another," he said. "For example, you could create mathematical models
of how you look at a board in a game of chess, with your deliberations based on
what you think your opponent will do in response to your move."
Ring said Fair Outcomes essentially works using the principles of the "cake-cutting
game," where one child is told to cut two pieces of cake and a second
child is allowed to choose the first piece. "It gives Johnny an incentive
to cut the cake fairly, and Janie doesn't have an excuse not to pick a piece of
cake," he said.
In the case of a dispute over an Internet
transaction where a buyer has left negative feedback about a seller, the seller
can use Fair Reputations to make a confidential settlement offer. The buyer is
then invited to use the system to make a confidential offer to accept the
seller's proposal. If the seller's proposal meets or exceeds an outcome
that the buyer defines as acceptable, then the matter settles for the amount
proposed by the seller. If not, then the buyer can continue to
revise their offer up to the deadline, which is a minimum of seven days.
"In bargaining, people are afraid of appearing weak," Ring said.
"This allows confidentiality. The system can tell the buyer the seller's
settlement offer is not equal to or greater than their initial amount, and the
seller can continue to set amounts up to the deadline, which is a minimum of
seven days. If the buyer goes below the seller's settlement offer, they get the
Ring said a buyer can also select "final offer arbitration," in
which an impartial arbitrator looks at the two settlement amounts and the
specific details of the transaction and then decides which amount is fairer.
The buyer can opt to not have the arbitration be binding unless the buyer wins.
"This gives the seller a strong incentive to be fair," Ring said.
Ring said Fair Reputations can be used to resolve disputes in private online
transactions conducted on sites such as eBay, Amazon.com and Google Checkout,
as well as for any other e-commerce purchase for which buyers can leave
negative feedback. While no e-commerce site has yet agreed to discount negative
buyer feedback based on the results of a Fair Reputations settlement, Ring said
he expects the solution will gain traction.
"We are confident this system will be warmly welcomed by fair-minded buyers, sellers and e-commerce administrators," he said.
"I read the description of [Fair Proposals] and thought it
ingenious," said Thomas C. Schelling, a professor at the School
of Public Policy of the University
of Maryland. "More than that,
I thought it ought to find a market. I think it works."
Ring said all user access to Fair Reputations is
browser-based and protected by a variety of cryptographic systems. Sellers pay
a $10 fee to initiate an invitation to resolve a dispute with a buyer.