JA Hill and MP Wellman
We present a game-theoretic model of online tangible private goods rental.
Rental mechanisms adhering to this model are classified according to whether their principals and transfer paths are centralized or peer-to-peer. A key issue in all cases is providing incentives for participants to accurately report on quality of the rented good. Our main contribution is a novel mechanism for the situation in which the principal is independent of the owners of goods available in the market and in which goods are transferred directly between renters. We show that it is possible to set mechanism parameters—payments and penalty functions—so that truthful reporting of the quality of goods is a Nash equilibrium.