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Lemons on the Web: A Signalling Approach to the Problem of Trust in Internet Commerce

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Abstract

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.

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  • Lee, Boon-Chye & Ang, Lawrence & Dubelaar, Chris, 2004. "Lemons on the Web: A Signalling Approach to the Problem of Trust in Internet Commerce," Economics Working Papers wp04-10, School of Economics, University of Wollongong, NSW, Australia.
    • Handle: RePEc:uow:depec1:wp04-10
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    File URL: http://www.uow.edu.au/content/groups/public/@web/@commerce/@econ/documents/doc/uow012171.pdf
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    Cited by:

    1. Hartmann, Karen & Pezoldt, Kerstin, 2018. "Der Einfluss von Website-Qualität auf das Markenimage: Eine Analyse am Beispiel des öffentlich-rechtlichen Rundfunks," Ilmenauer Schriften zur Betriebswirtschaftslehre, Technische Universität Ilmenau, Institut für Betriebswirtschaftslehre, volume 1, number 12018, September.

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    More about this item

    Keywords

    trust (social behaviour); consumer behaviour;

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics

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