Fair Outcomes Addresses E-commerce Disputes

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.

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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 full amount."

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.