Abstracts

Ba, Sulin and Pavlou, Paul A.. Evidence of the Effect of Trust Building Technology in Electronic Markets: Price Premiums and Buyer Behavior. MIS Quarterly. Sep 2002. volume 26, issue 3. 243-268. [added Apr 15, 02]

Abstract: Despite the wide use of reputational mechanisms such as eBay's Feedback Forum to promote trust, empirical evidence has shown conflicting results on whether online feedback mechanisms really induce trust and lead to higher auction prices. This study examines the extent to which trust can be induced by proper feedback mechanisms in electronic markets, and how some risk factors play a role in trust formation. Drawing from economic, sociological, and marketing theories and using data from both an online experiment and an online auction market, we demonstrate that appropriate feedback mechanisms can induce calculus-based credibility trust without repeated interactions between two transacting parties. Trust can mitigate information asymmetry by reducing transaction-specific risks, therefore generating price premiums fror reputable sellers. In addition, the research also examines the role that trust plays in mitigating the risks in transactions that involve very expensive products or experience products.