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!
Diagnoses: When Are Several Opinions Better Than One?
19.07.2016 | Max-Planck-Institut für Bildungsforschung
High in calories and low in nutrients when adolescents share pictures of food online
07.04.2016 | University of Gothenburg
Researchers from the Institute for Quantum Computing (IQC) at the University of Waterloo led the development of a new extensible wiring technique capable of controlling superconducting quantum bits, representing a significant step towards to the realization of a scalable quantum computer.
"The quantum socket is a wiring method that uses three-dimensional wires based on spring-loaded pins to address individual qubits," said Jeremy Béjanin, a PhD...
In a paper in Scientific Reports, a research team at Worcester Polytechnic Institute describes a novel light-activated phenomenon that could become the basis for applications as diverse as microscopic robotic grippers and more efficient solar cells.
A research team at Worcester Polytechnic Institute (WPI) has developed a revolutionary, light-activated semiconductor nanocomposite material that can be used...
By forcefully embedding two silicon atoms in a diamond matrix, Sandia researchers have demonstrated for the first time on a single chip all the components needed to create a quantum bridge to link quantum computers together.
"People have already built small quantum computers," says Sandia researcher Ryan Camacho. "Maybe the first useful one won't be a single giant quantum computer...
COMPAMED has become the leading international marketplace for suppliers of medical manufacturing. The trade fair, which takes place every November and is co-located to MEDICA in Dusseldorf, has been steadily growing over the past years and shows that medical technology remains a rapidly growing market.
In 2016, the joint pavilion by the IVAM Microtechnology Network, the Product Market “High-tech for Medical Devices”, will be located in Hall 8a again and will...
'Ferroelectric' materials can switch between different states of electrical polarization in response to an external electric field. This flexibility means they show promise for many applications, for example in electronic devices and computer memory. Current ferroelectric materials are highly valued for their thermal and chemical stability and rapid electro-mechanical responses, but creating a material that is scalable down to the tiny sizes needed for technologies like silicon-based semiconductors (Si-based CMOS) has proven challenging.
Now, Hiroshi Funakubo and co-workers at the Tokyo Institute of Technology, in collaboration with researchers across Japan, have conducted experiments to...
14.10.2016 | Event News
14.10.2016 | Event News
12.10.2016 | Event News
21.10.2016 | Health and Medicine
21.10.2016 | Information Technology
21.10.2016 | Materials Sciences