Lemons on the Web: A Signalling Approach to the Problem of Trust in Internet Commerce
Asymmetric information is at the heart of situations involving trust. In the case of B2C Internet commerce, the information asymmetry typically relates to the difficulty that consumers have of distinguishing between "trustworthy" and "untrustworthy" Web merchants. The impasse can be resolved by the use of signals by trustworthy Web merchants to differentiate themselves from untrustworthy ones. Using an experimental design where subjects are exposed to a series of purchase choices, we investigate three possible signals, an unconditional money-back guarantee, branding, and privacy statement, and test their efficacy. Our empirical results confirm the predictions suggested by signalling theory.
|Date of creation:||2004|
|Contact details of provider:|| Postal: School of Economics, University of Wollongong, Northfields Avenue, Wollongong NSW 2522 Australia|
Phone: +612 4221-3659
Fax: +612 4221-3725
Web page: http://business.uow.edu.au/econ/index.html
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Wiener, Joshua Lyle, 1985. " Are Warranties Accurate Signals of Product Reliability?," Journal of Consumer Research, Oxford University Press, vol. 12(2), pages 245-250, September.
- Ippolito, Pauline M, 1990. "Bonding and Nonbonding Signals of Product Quality," The Journal of Business, University of Chicago Press, vol. 63(1), pages 41-60, January.
- Price, Lydia J. & Dawar, Niraj, 2002. "The joint effects of brands and warranties in signaling new product quality," Journal of Economic Psychology, Elsevier, vol. 23(2), pages 165-190, April.
- Li, Zhan G. & Gery, Nurit, 2000. "E-tailing--For all products?," Business Horizons, Elsevier, vol. 43(6), pages 49-54.
- Tülin Erdem & Michael P. Keane, 1996. "Decision-Making Under Uncertainty: Capturing Dynamic Brand Choice Processes in Turbulent Consumer Goods Markets," Marketing Science, INFORMS, vol. 15(1), pages 1-20.
- Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
- Boulding, William & Kirmani, Amna, 1993. " A Consumer-Side Experimental Examination of Signaling Theory: Do Consumers Perceive Warranties as Signals of Quality?," Journal of Consumer Research, Oxford University Press, vol. 20(1), pages 111-123, June.
- Michael Spence, 1973. "Job Market Signaling," The Quarterly Journal of Economics, Oxford University Press, vol. 87(3), pages 355-374.
When requesting a correction, please mention this item's handle: RePEc:uow:depec1:wp04-10. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Peter Siminski)
If references are entirely missing, you can add them using this form.