ECONOMICS OF ILLICIT BEHAVIORS: EXCHANGE IN THE INTERNET WILD WEST

Abstract

The first paper is an analysis of the role reputation plays in the Deep Web using data from the Internet black market site, The Silk Road. This encrypted online marketplace employed crypto currency and functioned over the Tor network. Utilizing a modeling technique, informed by trade auction theory, we investigate the effect of seller reputation. Analysis of the seller’s reputation gives us insights into the factors that determine the prices of goods and services in this black marketplace. Data on cannabis listings is parsed from the Silk Road website and covers an 11-month time period, from November 2013 to October 2014. This data demonstrates that reputation acts as a sufficient self-enforcement mechanism to allow transactions. These findings exemplify the robustness of spontaneous order with respect to the Deep Web as an emergent marketplace.