Title: THE EFFECTIVENESS OF SELLER CREDIBILITY SYSTEMS IN THE ONLINE AUCTION MARKET: MODELING THE SELLER’S POINT OF VIEW
ABSTRACT: The Internet has turned out to be an appealing place for doing business, with its unprecedented ability to bring together a large number of buyers and sellers, cover a wide scale of market and automate transaction processes, etc. However, this powerful technology of information transformation brings a greater trust problem than corresponding transactions in brick-and-mortar markets, because of the lack of information on product quality and seller honesty. Product information may be selectively disclosed, which increases the chance of fraud and dishonest behaviors. This research focuses on online feedback systems. Analytical models are developed to assess the impact of such feedback systems. Feedback systems, by themselves, are shown to work under certain conditions even in an ideal environment. Influences from incentives for providing feedback, shilling and ID changing are comprehensively discussed. If consumers do value trust, one should expect the more trustworthy sellers to generate higher prices for their products than the less trustworthy sellers. A higher price can offer incentives for sellers to be trustworthy. Following the analytical model, empirical tests of online feedback system are conducted.
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Project Intro: The benefits from online markets have been studied extensively. Bakos (1997) examined electronic market and search costs. He claims that creating an electronic market can help lower a buyer’s cost of acquiring information on price and product characteristics. By lowering search costs, a seller’s ability to extract monopolistic profits is reduced. Buyers enjoy lower prices due to increased competition, better information on product offerings and lower search costs. Bakos (1991) suggested electronic markets may reduce transaction costs. The ability to post and receive prices on electronic markets and to post product information from several buyers and sellers may reduce asset specificity by providing alternative uses for productive assets.
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