Building Effective Online Marketplaces with Institution-Based Trust

Building Effective Online Marketplaces with Institution-Based Trust

December 2002 | Paul Pavlou, David Gefen
This paper explores how online auction marketplaces build buyer trust in sellers through institutional structures, such as buyer-driven certification, auction house escrow services, and credit card guarantees. The authors hypothesize that these structural assurances can increase buyer trust, which in turn reduces perceived risk and enhances satisfaction, ultimately promoting transaction intentions. The study is based on institutional trust theory (Zucker, 1986) and examines 274 buyers in Amazon's online auction marketplace. The results support the hypotheses, highlighting the importance of institution-based trust in online networks. The study also discusses the implications for auction houses and suggests future research directions, including the role of third-party trust and the integration of familiarity-based trust.This paper explores how online auction marketplaces build buyer trust in sellers through institutional structures, such as buyer-driven certification, auction house escrow services, and credit card guarantees. The authors hypothesize that these structural assurances can increase buyer trust, which in turn reduces perceived risk and enhances satisfaction, ultimately promoting transaction intentions. The study is based on institutional trust theory (Zucker, 1986) and examines 274 buyers in Amazon's online auction marketplace. The results support the hypotheses, highlighting the importance of institution-based trust in online networks. The study also discusses the implications for auction houses and suggests future research directions, including the role of third-party trust and the integration of familiarity-based trust.
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[slides and audio] Building Effective Online Marketplaces with Institution-Based Trust