Consumer adoption of group-buying auctions an expe

Consumeradoptionofgroup-buyingauctions:anexperimentalstudyRobertJ.Kauffman·HsiangchuLai·Huang-ChiLin©SpringerScience+BusinessMedia,LLC2010AbstractInternet-basedgroup-buyingauctionsenableconsumerstoobtainvolumediscounts,buttheyfaceriskandtrustissuesthatarenotpresentinothere-retailingformats,whichaffectstheiradoptionbyconsumers.Bid-dersexperienceuncertaintyaboutthefinalauctionprice,andtheriskofwhethertheauctionwillbecompleted.Weevaluatetextualcommentsandthenumberofbidsmadeinanauctionasdriversofaconsumer’sperceivedfinancialandpsychologicalriskstowardthegroup-buyingauctionmechanismandtrustintheauctioninitiator.WeuseanInternet-basedexperimentaltestbedforonlinegroup-buyingauctionsandwillreportononeexperimentthatweconducted.Ourresultsindicatethattextualcommentsmadebytheparticipantsaboutsellersinpastauctionsandexistingbidsaffectedaconsumer’sperceivedtrustintheauctioninitiatorandthefinancialriskofthemechanism.Positivetextualcommentsandmorebidsappeartoenhanceperceivedtrustintheauctioninitiatorandreducefinancialrisk,andotherconsumersaremorewillingtomakebidsasaresult.Consumerscontinuedtoexpressconcernsabouttheuncertaintyofthefinalgroup-buyingauctionpricethough.KeywordsBids·Electroniccommerce·Experiment·Group-buyingauctions·Installedbase·Networkeffects·Mechanismdesign·Ratings·Reputation·Risk·Technologyadoption·Textualcomments·Trust1IntroductionDynamicpricingmechanismdesignshavebeendevelopedtoenablebuyersandsellerstointeractivelynegotiateproductprices[50].Suchmechanismsine-commercehavethepotentialtooutperformposted-pricesellingundersomecircumstances.Group-buyingauctionsontheInternetwereintroducedinthemid-1990s,asamarketmechanismthatcollectsconsumers’orderstoobtainvolumediscounts[34].1Thismechanismenablesretailerstominimizecus-tomeracquisitioncostsandtooffloadexcessinventories.ThisbusinessmodelforInternet-basedsellinghasbeenfraughtwithproblemsthataffectconsumerwillingnesstoadopt.Mobshop,MercataandLetsBuyItwereallunsuc-cessful,thoughtheywereheavilyfunded[40].Surprisinglythough,group-buyingbusinesseshavebeentryingtomakeacomebackrecently.Forinstance,anumberofcompaniesintheUnitedStates,includingPikaba(),theGroupBuyCenter()andSangabo(),GroupBuyDiscounts.com(:[e-mail](&)·H.-C.LinCollegeofManagement,NationalSunYat-senUniversity,No.70,LienhaiRd.,Kaohsiung80424,Taiwane-mail:[e-mail]-mail:[e-mail]1Weusethetermbidtorepresentconsumerbehaviorthatinvolvessendinganordertoagroup-buyingauction.Thisinvolvesspecifyingapriceatwhichtheconsumeriswillingtobuyanitem.Itcanalsorefertothesimpleractofbeingwillingtobuythesaleitematwhatevercomesoutasthefinalpriceofthegroup-buyingauction.Thetermorderalsoisusedtorepresentthisideaingroup-buyingauctionsinTaiwan:aconsumerwhoplacesanorderismakingacommitmenttobeapurchasingparticipantinagroup-buyingauctionatthefinalpriceoftheauction.123InfTechnolManagDOI10.1007/s10799-010-0068-zinactive),Zag(),andGroupon(),haveadoptedgroup-buyingintheircorebusinessmodels.(See“AppendixA”forsomegroup-buyingsitesthatwereinoperationin2010inTaiwanandtheUnitedStates.)InTaiwan,wherethepresentresearchhasbeencon-ducted,onlinegroup-buyingauctionshavebecomeanespeciallyinterestingmodelforonlinetransactionsinrecentyears[9].Forexample,thePTTbulletinboardsystem(批踢踢at)hasbeenanactivegroup-buyingauctionplatforminTaiwan.Ithad360-plusgroup-buyingrecruitingpostsinoperationduringJanuary2010.Othergroup-buyingmarketplacesinTaiwanincludeDinBenDon!(),iHergo(),TwDeco.com(),andYLib.com().Thepotentialofgroup-buyingauctionsinTaiwanisevidentfromthefollowinganecdotes.InitsfirstmonthofoperationinMarch2007,iHergowasvisitedby20,000peopleandhad2,000peopleregisterasmembers.Bytheendofitsfifthweek,400transactionshadbeenmade[9].InMay2008,theaveragenumberofusersexceeded150,000inDinBenDon![16],with2,300participatingconsumers,whouseitasanintermediarytobuylunchboxes.AbakeryshopineasternTaiwansoldabout4,000Tiramisucakeseverydaywhenitusedagroup-buyingauction,thoughithadonlybeenabletosell100adaybefore.In2007,60%ofitssalescamefromgroup-buyingauctions[3].Fromtheaboveanecdotes,wecanseetheextentofthecurrentinterestinthegroup-buyingauctionmechanism.Togivethereaderafeelforsomeofthefeaturesthatareoperativeinonlinegroup-buyingauctions,wecomparethemtotraditionalauctionmechanisms.2SeeTable1,whoseentriesareorderedtoconveythelogicofthegroup-buyingauctionprocess.KambilandvanHeck[33]pro-posedfiveprocessesthatoccurinelectronicmarketsanddigitalexchange:informationsearch,authentication,pricenegotiation,paymentandsettlement,andpost-transactionlogistics.Informationsearchrepresentstheinformationgatheringandevaluationprocessesbybuyersandsellerstoidentifytransaction-makingopportunities.Authenticationverifiestheauthenticityofthetradingparties.Pricenegotia