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Contract choice in C2C E-commerce based on game analysis

He Wei

With the development of C2C e-commerce, selecting proper contract to govern the transactions becomes particularly important. Although scholars have made considerable theoretical efforts to understand the rationale for various contractual arrangements, few empirical studies are undertaken to analyze contract choice in C2C e-commerce. Usually the interaction of informal and formal contract was analyzed under two-side repeated game framework. By extending the analysis from two-side repeated game framework to multi-side game situation, this paper enables us to discuss the contract implementation in non-frequent transactions. The conclusions are: when contract cost is very high, informal contract is the best choice; when contract cost is relatively high, there is substitution between formal contract and informal contract; when contract cost is low, formal contract complements informal contract.