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For e-Business F. Dignum Utrecht University Trust Reputation and.

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Presentation on theme: "For e-Business F. Dignum Utrecht University Trust Reputation and."— Presentation transcript:

1 for e-Business F. Dignum Utrecht University Trust Reputation and

2 Contents Trust and risk Trustworthy trade procedures Trusted partners and reputation Conclusions

3 Trust is necessary to make e-business transactions work Trust is a very complex concept that consists of many facets Some facets cannot be influenced or assessed properly Trade procedures can be verified on trustworthiness Reputation mechanisms can be used to check trustworthiness of a partner Trusted third parties help to bootstrap trust

4 Trust and risk Why is TRUST such a big issue in e-business? E-business is the exchange of products (or services) and money whereby the partners interact by electronic means (WWW, e-mail, EDI, etc.)

5 Social Dilemma Rationally, the expected utility for each partner is highest if it will defect (I.e. not deliver its part of the exchange). Only if the trust in a good outcome of the exchange exceeds the risk that the partner will defect will the exchange take place!

6 Risk and costs Can the risk of the exchange be reduced or eliminated? Yes, by establishing elaborate external enforcing mechanisms. Disadvantage: these mechanisms are costly –OK for B2B transactions (as in international trade) –To expensive for most B2C transactions

7 Trust in what? Trust in procedure –Fairness –Exceptions –Accountability Trust in partner –Information about partner identity and reliability –Reputation of partner (on Internet and/or “real” world) –Information about product

8 Trustworthy trade procedures When are trade procedures trustworthy? Use some general “auditing” principles to check the features of the trade procedures. Formally verify whether the procedure complies to the principles –Note: this is difficult, but only has to be done once!

9 Why formal verification? 1. Ensure a kind of “fairness” in trade procedure 2. Existing control replaced by more efficient ones 3. New ways of business for which existing controls do not work 4. Not all existing procedures can be electronified

10 Example Audit Principle If the party playing Role 1 does not trust the party responsible for Role 2, then before Role 1 executes a primary activity it should have witnessed the performance of the counter-activity by Role 2, unless it has received evidence that Role 2 has executed its tasks.

11 Example Before Paying, the Buyer (Role 1) must first witness or receive evidence that the Seller (Role 2) did deliver the goods

12 Issuing bank corresponding bank consignee shipper carrier 1. Purchase order 2. acknowledgement 3. LC request 4. LC 5. LC 7. BOL7. money 6. BOL 10. BOL 8. BOL 9. BOL 8. money 9. money 10. Goods 6. Goods Example Check Documentary Credit Procedure

13 Formal representation 1.Describe audit principles and procedures in the same formalism. Then the verification gets down to proving “inconsistencies” between the principles and trade procedures. 2.A formal description of the audit principles facilitates the analysis of the principles themselves

14 Compliance auditing Auditing : Check if Procedure Complies with Audit Principles Compliance Definition : a Trade Procedure Complies with the Audit Rules, if after any series of events S1,.., Si that the trade procedure applies to, no future state Sj (i < j) can be reached such that C1) Sj satisfies the antecedent of an audit rule C2) Sj does not violate obligations from the trade procedure C3) Sj does violate the consequence of the audit rule.

15 PPP does NOT comply to rule II PPP is not trustworthy for the buyer - if shipment takes place at the other end of the world - e.g. Buyer in Hong Kong and Seller in Rotterdam - buyer will not accept such a procedure if he receives no evidence that the seller indeed shipped the goods to him.

16 How to improve PPP? introduce extra step: seller must first send proof of shipment to the buyer e.g. Bill-of-Lading issued by carrier (third party t3) New PPP': [send(r1,r2,order)]O r2r1 (ship(r2,r1,goods))  O r3r1 (testify(r3,r1,(ship(r2,r1,goods)))) [receive_evidence(r1,DONE(ship(r2,r1,goods))] O r1r2 (arrange(r1,r2,payment))

17 Trust in partner Knowledge of partner –Brand name –Size of the organization –Reputation –Importance of positive result of transaction for partner Where does the information about the partner come from? Geographic and legal proximity

18 The nature of reputation Reputation is compositional: the overall opinion on an entity is obtained as a result of the combination of different pieces of information. Reputation is subjective -Each individual has different experiences. -Each individual has a different social environment. -Each individual evaluates things in a different manner.

19 The nature of reputation Reputation is a multi-facet concept. Being a Good flying company Having good planes Never losing luggage Serving good food Reputation of... Reputation is influenced by the social environment.

20 Basic components of reputation Outcome: The initial contract –to take a particular course of actions –to establish the terms and conditions of a transaction. AND The actual result of the contract.

21 Basic components of reputation Delivery_date = c 10/02/02 Prize = c 2000 Quality = c A Delivery_date = r 15/02/02 Prize = r 2000 Quality = r C Contract fulfillment Outcome example

22 Basic components of reputation agent a’s outcomes data base contracting parties issues index contractual values real values time I = {Price, Quality, Delivery_date}

23 The ReGreT system

24 ReGreT system Ontological dimension Possibility to combine reputations on different aspects to calculate complex ones Individual dimension Use of direct interactions Social dimension Use of information coming from other agents and the social environment

25 ReGreT system

26 Individual dimension

27 Models the direct interaction between two partners. The reputation based in this dimension is the most reliable. It takes into account all the peculiarities of the target partner and does not rely on behavioural trends. Even “black sheep” partners can be given a reputation using this dimension. It is not easy obtain the necessary information to calculate it.

28 Social dimension

29 Two types of social reputation: Witness reputation: Based on the information about the target partner coming from other parties. System reputation: Default reputation value based on the role played by the target party or the reputation ascribed to it by a trusted third party.

30 System reputation This part of the reputation comes from the role a partner plays. E.g. banks are usually thought to be reliable partners It can also follow from the source of information about the partner. Trusted Third Parties can certify the trustworthiness of a party with respect to some aspects E.g. credit worthiness as certified by a bank

31 Witness reputation “Reputation that an agent builds on another agent based on the beliefs gathered from society members (witnesses).” Problems of witness information: Can be false. Can be incomplete. It may suffer from the “correlated evidence” problem.

32 Positive vs. Negative reputation Negative experiences with a party can easily be faked Result is similar to gossip: easily destructs community Positive experiences are more difficult to fake Good example: reputation system of e-Bay

33 Outcome reputation Witness reputation Neighbourhood reputation System reputation O W N Putting all together: The Regret system

34 Conclusions Trust is necessary to make e-business transactions work Trust is a very complex concept that consists of many facets Some facets cannot be influenced or assessed properly Trade procedures can be verified on trustworthiness Reputation mechanisms can be used to check trustworthiness of a partner Trusted third parties help to bootstrap trust

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