It has been widely assumed that online auction sites always need to build trust and reduce risk, but a forthcoming article in Information Systems Research counters that it is not necessarily "the higher the better" for risk-reducing safeguards – which are costly for companies to build and maintain – because some buyers might view them as stifling good deals while others might not consider them at all.
The paper, co-authored by Paul Pavlou of Temple University's Fox School of Business and David Gefen of Drexel University's LeBow College of Business, both in Philadelphia, analyzed data from 398 buyers on eBay's and Amazon's marketplaces to gauge buyers' assessments of online safeguards, such as escrow services, feedback mechanisms and market rules.
The authors argue that the primary factors buyers consider when making purchases online are risk (potential economic loss) and trust (social norms with sellers). Pavlou and Gefen state that auction safeguards generally guard against risk and ignore elements of trust. But when typical buyers make online purchases, as long as there is some level of security – such as credit card guarantees – they really care about whether or not they can trust the community of sellers.
The "sharp distinction" between what marketplace providers guard against and what buyers deem as important indicates "that institutional structures in today's online marketplaces focus on tangible assurances aimed at reducing the buyers' economic vulnerability and not on the intangible aspects of the transaction that aim at reducing their social vulnerability," according to the study.
The authors found that risk is only a significant consideration for buyers using marketplaces with moderate levels of safeguards. In unsafe markets, buyers are simply unwilling to transact. In very safe markets, the chance of risk is so low that economic loss isn't even a concern.
Pavlou and Gefen also found that transaction activity peaks in online marketplaces with moderate safeguards. But the average level of current security measures is nearly 25 percent higher than where transactions peak. This finding demonstrates that current safeguards may be higher – and potentially viewed by some buyers as restricting bargains – than the socially optimal level for online auctions.
While economic risk was found to be an important consideration for buyers only in moderately risky marketplaces, the effect of trust on transactions "extends throughout the spectrum" of unsafe, somewhat safe or extremely safe auction sites.
Pavlou and Gefen state that online transactions, while primarily an economic exchange, also have intangible social rules of conduct, such as reciprocal favors in current or future transactions, and long-term relationship building.
"Although this may imply that online marketplaces have correctly recognized that buyers focus on economic losses in their transaction decision-making process, perhaps they have done so at the expense of ignoring relevant social aspects," the authors wrote.
Brandon Lausch | EurekAlert!
Smart Data Transformation – Surfing the Big Wave
02.12.2016 | Fraunhofer-Institut für Angewandte Informationstechnik FIT
Climate change could outpace EPA Lake Champlain protections
18.11.2016 | University of Vermont
Have you ever wondered how you see the world? Vision is about photons of light, which are packets of energy, interacting with the atoms or molecules in what...
A multi-institutional research collaboration has created a novel approach for fabricating three-dimensional micro-optics through the shape-defined formation of porous silicon (PSi), with broad impacts in integrated optoelectronics, imaging, and photovoltaics.
Working with colleagues at Stanford and The Dow Chemical Company, researchers at the University of Illinois at Urbana-Champaign fabricated 3-D birefringent...
In experiments with magnetic atoms conducted at extremely low temperatures, scientists have demonstrated a unique phase of matter: The atoms form a new type of quantum liquid or quantum droplet state. These so called quantum droplets may preserve their form in absence of external confinement because of quantum effects. The joint team of experimental physicists from Innsbruck and theoretical physicists from Hannover report on their findings in the journal Physical Review X.
“Our Quantum droplets are in the gas phase but they still drop like a rock,” explains experimental physicist Francesca Ferlaino when talking about the...
The Max Planck Institute for Physics (MPP) is opening up a new research field. A workshop from November 21 - 22, 2016 will mark the start of activities for an innovative axion experiment. Axions are still only purely hypothetical particles. Their detection could solve two fundamental problems in particle physics: What dark matter consists of and why it has not yet been possible to directly observe a CP violation for the strong interaction.
The “MADMAX” project is the MPP’s commitment to axion research. Axions are so far only a theoretical prediction and are difficult to detect: on the one hand,...
Broadband rotational spectroscopy unravels structural reshaping of isolated molecules in the gas phase to accommodate water
In two recent publications in the Journal of Chemical Physics and in the Journal of Physical Chemistry Letters, researchers around Melanie Schnell from the Max...
16.11.2016 | Event News
01.11.2016 | Event News
14.10.2016 | Event News
05.12.2016 | Power and Electrical Engineering
05.12.2016 | Materials Sciences
05.12.2016 | Power and Electrical Engineering