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!
Win-win strategies for climate and food security
02.10.2017 | International Institute for Applied Systems Analysis (IIASA)
The personality factor: How to foster the sharing of research data
06.09.2017 | ZBW – Leibniz-Informationszentrum Wirtschaft
University of Maryland researchers contribute to historic detection of gravitational waves and light created by event
On August 17, 2017, at 12:41:04 UTC, scientists made the first direct observation of a merger between two neutron stars--the dense, collapsed cores that remain...
Seven new papers describe the first-ever detection of light from a gravitational wave source. The event, caused by two neutron stars colliding and merging together, was dubbed GW170817 because it sent ripples through space-time that reached Earth on 2017 August 17. Around the world, hundreds of excited astronomers mobilized quickly and were able to observe the event using numerous telescopes, providing a wealth of new data.
Previous detections of gravitational waves have all involved the merger of two black holes, a feat that won the 2017 Nobel Prize in Physics earlier this month....
Material defects in end products can quickly result in failures in many areas of industry, and have a massive impact on the safe use of their products. This is why, in the field of quality assurance, intelligent, nondestructive sensor systems play a key role. They allow testing components and parts in a rapid and cost-efficient manner without destroying the actual product or changing its surface. Experts from the Fraunhofer IZFP in Saarbrücken will be presenting two exhibits at the Blechexpo in Stuttgart from 7–10 November 2017 that allow fast, reliable, and automated characterization of materials and detection of defects (Hall 5, Booth 5306).
When quality testing uses time-consuming destructive test methods, it can result in enormous costs due to damaging or destroying the products. And given that...
Using a new cooling technique MPQ scientists succeed at observing collisions in a dense beam of cold and slow dipolar molecules.
How do chemical reactions proceed at extremely low temperatures? The answer requires the investigation of molecular samples that are cold, dense, and slow at...
Scientists from the Max Planck Institute of Quantum Optics, using high precision laser spectroscopy of atomic hydrogen, confirm the surprisingly small value of the proton radius determined from muonic hydrogen.
It was one of the breakthroughs of the year 2010: Laser spectroscopy of muonic hydrogen resulted in a value for the proton charge radius that was significantly...
17.10.2017 | Event News
10.10.2017 | Event News
10.10.2017 | Event News
20.10.2017 | Information Technology
20.10.2017 | Materials Sciences
20.10.2017 | Interdisciplinary Research