An economic model of optimal fraud control and the aftermarket for security services in online marketplaces

Cited 4 time in webofscience Cited 0 time in scopus
  • Hit : 631
  • Download : 0
The anonymity of online markets allows traders to easily behave opportunistically. Online marketplaces can lower the uncertainty of participants' identities by adopting preventative controls such as privacy disclosure rules. However, the use of severe privacy controls to engender risk-free environments might sacrifice not only the size of transactions in the marketplace but also the demand for optional security services like escrow services, which constitute a very sizable revenue source for the marketplace services provider. In this vein, we investigate the probability that an integrated online marketplace (IOM) with security services strategically adjusts privacy controls to incentivize traders to self-select both basic transactions and optional security services. Our results show that an integrated marketplace increases the probability of allowing more fraud than is socially optimal by lowering privacy controls. Market risk can be viewed as an asset for an integrated marketplace rather than a liability that inflicts transaction costs on worried traders. Our study argues that marketplaces may differ in terms of their fraud control from what is socially optimal, according to their revenue structures so that the control of online fraud needs to be regulated from the social perspective. However, under certain conditions, integration of this aftermarket will not harm traders or the social welfare. (C) 2009 Elsevier B. V. All rights reserved.
Publisher
ELSEVIER SCIENCE BV
Issue Date
2010-09
Language
English
Article Type
Article
Keywords

INFORMATION PRIVACY; PRODUCT QUALITY; MORAL HAZARD; WARRANTIES; LEMONS

Citation

ELECTRONIC COMMERCE RESEARCH AND APPLICATIONS, v.9, no.5, pp.435 - 445

ISSN
1567-4223
DOI
10.1016/j.elerap.2009.08.003
URI
http://hdl.handle.net/10203/101466
Appears in Collection
MT-Journal Papers(저널논문)
Files in This Item
There are no files associated with this item.
This item is cited by other documents in WoS
⊙ Detail Information in WoSⓡ Click to see webofscience_button
⊙ Cited 4 items in WoS Click to see citing articles in records_button

qr_code

  • mendeley

    citeulike


rss_1.0 rss_2.0 atom_1.0